What is indemnity value income protection?

Indemnity value income protection is the standard type of income protection insurance now available in Australia. It bases your payout amount on your actual income in the 12 months prior to you making a claim. This means the benefit you receive reflects your income at the time of disability not a pre-determined amount from when you purchased the policy.

How is my income assessed for an indemnity value income protection policy?

When you make a claim under an indemnity policy, the insurer will typically look at your earnings in the 12 months immediately before you became unable to work. This can include your salary or wages as well as other taxable income such as commissions or regular bonuses. You will need to provide evidence like payslips tax returns or financial statements to support your income claim.

Can I still keep my existing agreed value income protection policy?

If you held an agreed value income protection policy before the regulatory changes in 2020 you are generally able to maintain your existing coverage. However you cannot take out a new agreed value policy or switch to another agreed value product if you did not have one previously. Be aware that making changes to your existing policy might sometimes lead to it being reissued under indemnity terms so it is wise to check with your insurer or a financial advisor before making any changes.

What documents do I need to provide when making an income protection claim under an indemnity policy?

To make an income protection claim under an indemnity policy you will typically need to provide documents that verify your income history, medical evidence of your illness or injury and details about your occupation. Income verification usually includes payslips tax returns, profit and loss statements or other financial records from the 12 months before your claim. The specific documents required may vary between insurers.

What happens if my income fluctuates significantly after I take out an indemnity income protection policy?

With an indemnity policy, if your income decreases significantly after you take out the policy your benefit payout will be based on your lower income at the time of claim. Conversely if your income increases you may be able to adjust your cover to reflect your higher earnings by contacting your insurer. It is important to regularly review your policy to ensure it aligns with your current financial situation.

Can I get income protection through my superannuation fund?

Yes many Australians can obtain income protection insurance through their superannuation fund. This can offer potential tax benefits and convenience as premiums may be paid directly from your super balance. However, cover arranged through superannuation may have different terms, conditions or limitations compared to policies held outside super so it is important to compare these options carefully.

Are there any situations where my income protection claim might be denied?

Yes there are several reasons an income protection claim might be denied. These can include not accurately disclosing your medical history or occupation when applying, making a claim for a condition that is an exclusion on your policy not meeting the waiting period requirements or if your disability does not meet the policy's definition of total or partial disablement. Always read your Product Disclosure Statement carefully.