Does Income Protection Insurance Cover Redundant Workers?

Income protection cover can be provided to workers but only if it's from a general insurer

Income protection insurance can cover Australian workers for redundancy if the policy comes from a general insurer. However, for income protection policies that come from life insurers, there is no redundancy cover.

Income protection policies that offer cover to redundant workers

The table below is a summary of cover and conditions for eligibility apply. Make sure you read through the Product Disclosure Statement (PDS) to see if you are covered.

ProviderStandard?Max percentage of income coveredMax amount of income coveredHow long will cover last?Minimum hours you'll need be working to be eligible
AAMI
  • Optional
75%$4,000Up to 3 months20
ANZ
  • Included
50%$3,000Up to 3 months20
Insuranceline
  • Optional
85%$3,000Up to 3 months30
NIB
  • Optional
85%$3,000Up to 3 months30
NRMA
  • Optional
85%$3,000Up to 3 months30
Suncorp
  • Optional
75%$4,000Up to 3 months20
Virgin
  • Optional
85%$3,000Up to 3 months30

Are there any other features that provide support during redundancy?

There is still some support on income protection policies from life insurance companies in the event the worker is made redundant. These benefits may include:

  • Involuntary Unemployment Waiver: Premiums waived while policy-holder is involuntarily unemployed. Usually only available for a period of 6 months and the insured will need to provide evidence that they are actively seeking employment.
  • Unemployment Benefit: Provider will pay the minimum repayment on the insured's mortgage while they are involuntarily unemployed. This payment will usually only be provided for a certain number of months and in most cases is only available if the mortgage was taken out with the same provider.

Some general insurance companies have income protection policies that cover redundancy

Compare redundancy cover with an adviser

finder.com.au is partnering with a team of consultants to handle its enquiry referrals and they do not currently provide income protection policies that offer cover for redundancy.
You may still like to receive a quote for income protection insurance WITHOUT redundancy cover.

So does income protection cover loss of job?

There are some general insurance providers that will offer a benefit payment in the event that the worker is made redundant. There are a number of products from general insurers that will provide a maximum benefit amount for a specified period if it is found that the worker was made redundant for reasons not related to their actual performance.

It is important for anyone considering this cover to be fully aware of the terms and conditions of the policy and understand situations when they would not be entitled to receiving a benefit, i.e most policies will only pay a claim if the customer is entirely without gainful employment.

So what exactly does income protection cover in Australia?

Standard income protection cover in Australia covers you if you are unable to work and earn a living as the result of a debilitating injury or illness. You will then be able to claim a portion of your income, which is arranged when you take out the plan, for a specified period of time, which is also arranged when you take out the plan. The things that you will not be covered for with an Australian income protection plan are:

  • If you lose your job because you are fired
  • If you are unable to work as a result of having to care for somebody
  • If you are unable to work for any other reason other than through an injury or illness

Generally, loss of a job through redundancy is covered by some mortgage protection policies.

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2 Responses

  1. Default Gravatar
    JanineNovember 13, 2016

    I am receiving income protection for mental health created from work and physical health I am hoping to return to work but my employer is creating a new physical test regime which I will not be able to pass . Also I will be returned to the same boss who caused my mental health problems .
    My psychiatrist will not return me to work with this boss
    My question is can me employer refuse to return me to work if I fail the physical test and if so will I continue to get income protection

    • Staff
      RichardNovember 14, 2016Staff

      Hi Janine,

      Thanks for getting in touch. finder.com.au is a comparison service and we are not permitted to provide our users with personalised financial or legal advice. Most policies in Australia don’t cover redundancy. You should speak with your insurer to find out what you’ll be covered for.

      Cheers,
      Richard

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