What impact does occupation have on income protection?
Your occupation can affect your income protection insurance by:
- Increasing your level of risk. This can increase the cost of your premium for income protection when you apply.
- Making you ineligible for cover. If your occupation is deemed to hazardous by the insurer they may reject your policy application.
- Influencing your ability to return to work. For example, someone with a manual job may be able to return to work in any occupation behind a desk.
Looking for guides to specific occupations?
What's discussed in this article?
- How do insurers determine my occupations level of risk?
- Does my salary affect income protection insurance?
- Does income protection for specific industries exist?
- What are the must-have policy features for any occupation?
- What else should I know about comparing income protection?
- Final advice for finding income protection for your occupation
Insurers classify your occupation as being either standard risk or special risk. A standard risk occupation does not expose you to specific dangers or hazards and does not require you to engage in physically, mentally or emotionally risky duties to complete your tasks. On the other hand, special risk occupations can be those which:
- Require you to complete hazardous tasks in your day to day role.
- Continually expose you to risks that can affect morale and lead to excessive drinking or other unhealthy lifestyle habits.
- Exposes you to poisonous chemicals.
- Requires you to work in unhealthy or unsanitary environments.
- Places you at risk of occupational diseases.
- Could cause excessive mental and nervous strain.
The amount you earn, as well your occupation, can determine the type of income protection you take out. For example, if you are a high income earner you may find it difficult to insure yourself for the level of income you are used to earning. Previously, the Australian insurance industry limited high income earners to an insured amount of $30,000 per month, which would only protect those who earned up to $480,000 a year (working out at 75% of annual income).
In general, insurance companies limit income protection benefits to around 75% of your income, as an incentive to return to work once you recover. However, as a result of ongoing and significant increases in the cost of living some insurers are now offer income protection benefits of up to $60,000 per month. This means that if you are a white collar professional such as a surgeon, doctor or lawyer you can be eligible for this new maximum income protection benefit amount.
Since most of us spend the majority of our time at work, your occupation and the industry you work in forms an important basis for assessing your risk factors. At the same time, choosing income protection for specific occupations provides you with more relevant and valuable coverage, not to mention more affordable premiums.
Tradespeople and construction workers
With many tradesmen and construction workers being required to have cover in place to work on site, many insurers have created policies that are designed specifically for this group. These policies often include:
- A specific injuries benefit. This feature covers common injuries such as a fracture to your leg, arm, skull, thigh or pelvis. Other injuries you can expect to be covered for include paralysis, total and permanent loss of sight in one eye, and the loss of the use of a foot or hand.
- Accident benefit option. This allows tradespeople or construction workers to claim a benefit before the end of the waiting period of their policy.
- Self employed and contract benefits. If you are a self employed tradesperson or you work on a contract basis, your income may fluctuate significantly from month to month and year to year. However, your insurer may be able to offer you a benefit which reflects your income, and is still enough to cover your expenses while you recover from illness or injury.
Oil, gas and mining industry workers
The additional risk of working in the oil, gas or mining industry can make it more difficult for these workers to get access to affordable cover. Some factors that will be considered by insurance companies include:
- If you work in an underground mine, or an open cut mine.
- If you use, or are in contact with explosives.
- If you work in hard or soft rock mining.
- If you work on a fly in, fly out basis.
You will also need to provide details about your exact job title and duties, as well as the hours you work in a typical rotation.
Doctors, surgeons, dentists and medical attendants
If you work as a health professional in the medical industry, you are exposed to a variety of risks in your day-to-day job. At the same time, you know just how easy it is to fall ill or be injured, and the effect that these situations have on a person’s lifestyle. Therefore, you will want to look for income protection insurance which covers you for:
- Needle stick injuries. This will typically include cover for occupationally acquired HIV, Hepatitis B and Hepatitis C.
- A non-offset clause. This entitles you to a full benefit payment even if you are already receiving compensation from WorkCover.
Farmers and agricultural industry workers
Farming can be a risky industry in which to work because of the sometimes significant seasonal and year to year fluctuations in earnings, and long term threats such as floods and droughts. However, you don’t have to struggle through those financial setbacks alone, because there are income protection policies which are specifically designed for the farming industry.
For example, a farmer’s life insurance policy benefit can be based on 30% of your gross or net farm turn over, or calculated by your net income. if you are a farmer looking for income protection insurance, you may also want to consider the benefits of stepped or level premiums for your situation, and consider whether you would be best suited to an indemnity or agreed value policy.
- Specified injury and illness benefits. This feature will pay a benefit if you suffer from one of the specific injuries listed in the policy, even if you continue with your work. These may include broken bones, cancer, a stroke or heart attack.
- Elective surgery. Coverage for injuries which are caused by elective or cosmetic surgery.
- Bed confinement. Waives the waiting period and pays benefits immediately if you are confined to a hospital bed.
- Accommodation and travel assistance. Covers the costs of accommodation and travel for family members who need to visit you if you are sick or injured away from home. This may include relocation assistance to pay for air fares if you are disabled while overseas.
- Family care. Provides a family income assistance benefit if you require another family member to take care of you.
- Home care. Pays for the assistance of a full time carer if required.
- No claim bonus. Increases your benefit amount at no extra cost if you have held the policy for a certain amount of time without making a claim.
- Rehabilitation incentive. Pays a benefit towards the costs of rehabilitation care.
- Guaranteed future insurability. Increases your benefit amount if your salary package increases.
- Increasing claims benefit. Ensures that your benefit amount increases each year in line with the CPI, once a claim has commenced. This is especially important in income protection policies with a long benefit period, such as until retirement, so that your benefit amounts are able to continue to meet your family’s financial needs as inflation increases.
- Day one accident cover. Waives the waiting period if your disability is the result of an accident.
- Which medical conditions are covered. Each insurer has their own inclusions and exclusions. In general there is no set list of eligible medical conditions that result in a pay out.
- Cover at work and outside of work.You may think you’re protected by WorkCover and that you will be compensated in the event of illness or injury. However, WorkCover only pays out for incidents that occur due to your occupation. Income protection ensures you are insured for injury and illness both on site and at home.
- Relevant coverage. The amount of cover you choose should reflect your future needs. This is why some income protection policies increase your cover amount each year to keep up with the inflation rates.
- Pays a portion of your income and extras. Most income protection insurance policies pay around 75% of your regular income while you are off work with an illness or injury. This payment also includes superannuation contributions and any other benefits you receive.
- Your choice of waiting period. Depending on your situation and your current savings, you can choose the period between making a claim and receiving your first benefit payment. The longer the waiting period, the lower your premiums. Often you can choose a period between two weeks to two years. Just remember that benefit payments are often paid monthly in arrears, so if you have a waiting period of 60 days, you need to wait 60 days, plus another 30 days before you receive your first payment.
- Your choice of benefit period. Again, the longer the benefit, the more expensive your premiums. You don’t want your income protection to run out before you are ready to return to work. You can either choose a set period of two or five years for example, or until a certain age, such as 65, when your retirement funds will be accessible.
- Choose an agreed or indemnity benefit. You can choose an agreed benefit amount when you take out income protection, so that the full benefit amount will be paid regardless of your actual income at the time you lodge a claim. An indemnity benefit is based on your income at the time of the claim and requires financial checks before your benefit is paid.
- Extra policy features. Sometimes the costs of premiums can vary significantly between policies and income protection providers for coverage which is seemingly the same. However, comprehensive policies will usually offer a lot more added benefits that may be of use to you.
Choosing the factors that will complement your specific needs in an income protection insurance policy is just the first step. A perfect plan always involves formulating the strategy first, testing the strategy, going back to the game board, and executing the plan. Therefore, the next phase in getting the cover you need requires more legwork than brain power.
- Ask around. Ask people you know who already have income protection what to look for and what components should be included. They can give you insights from first-hand experience around certain policies, features and even insurance providers. If you still have unanswered questions you may wish to engage the services of an experienced and reputable insurance adviser for professional assistance.
- Shop around. This is a general rule whenever you want to buy something – from your groceries to your home furniture. Don’t be afraid to ask insurance agencies about the policy you are interested in. Probe and ask for clarifications when necessary. Don’t be shy to ask for discounts or inquire about their most competitive price. After all, it is your future you are talking about.
- Collect quotes. Get various quotes from different insurance providers. Insurance companies have websites which you can get instant quotes from. All you need to do is fill out the form and submit. You can even speak to an insurance agent right away to get a more detailed explanation about the policy you are eyeing. Moreover, the online quote you get is as accurate as the quote you get from an insurance agent.
- Review. After all the brain and leg work, review all the information you have got and arrange a meeting with your insurance adviser to discuss other possible options.