Income Protection Alternatives
Income protection for retirees, part time and casual workers and stay-at-home parents
Standard income protection insurance pays out a portion of your usual income if injury or illness leaves you temporarily unable to work. This can be very helpful, but leaves out homemakers, stay-at-home parents, part time and casual workers and anyone else who makes valuable contributions to the house hold.
Consider living expenses insurance if you can't get income protection
- Cover for unpaid roles. Living expenses insurance recognises the value of housework, cooking, cleaning, caring for children and other essential but unpaid jobs.
- Part time and casual workers. You might not be working enough for standard income protection insurance, but that doesn’t mean their earnings are any less vital. Living expenses insurance is well suited to part time and casual workers who want to protect their livelihoods.
Who offers living expenses cover?
|Brand||Amount of cover||Entry ages|
|AIA||$4,000 per month||16-50|
|BT||$5,000 (initial sum)||17-59|
|Onepath||$5,000 per month||19-75|
|Zurich||$2,000 per month||19-59|
|Virgin||$3,000 per month||18-64|
The information displayed in this table is a rough guide. For specific terms and conditions refer to the insurers Product Disclosure Statement (PDS).
At its core, a living expenses insurance policy will directly protect your income or the value of your day-to-day household contributions, much like income protection. This might be one of the more important types of insurance because it protects you from financial loss and means you can maintain your standard of living even when temporarily unable to work.
As well as the protection of your income, living expenses insurance includes other additional features as well. In some ways you might think of this type of insurance as a compact alternative to a full combined life insurance policy, designed for people who are on the lookout for cost-effective cover.
Lump sum benefit for death
Get a lump sum death benefits if you pass away or are diagnosed with a terminal illness.
- You do not have to be currently claiming benefits from the policy to get this.
- The benefits you receive are generally smaller than what you could get with a full combined life insurance policy. They are intended to help your family and friends cope with funeral and related costs, rather than providing for your children or partner.
Income protection benefit for specific benefits
If you incur a specific injuries, this option will pay a monthly benefit to help you adapt to disability without simultaneously needing to worry about keeping a roof over your head.
- You get six months of disability benefits for paralysis and three months for loss or limbs or sight.
- You receive these benefits even if you're not working
- These benefits resemble the trauma insurance part of a combined life insurance policy. One of the main differences is that with living expenses insurance you will typically be paying less overall, but you will only get cover against certain disabling injuries.
Significant disability benefits
If a significant disability leaves you unable to carry out independent daily tasks, such as dressing, using the bathroom or getting out of bed unassisted, living expenses insurance can help pay for the requisite accommodation and care.
- This means that homemakers, retirees and stay-at-home carers are also able to access disability benefits with this type of policy. Under this policy, a disability is defined by more than just “not being able to work”.
If you claim benefits from living expenses insurance, you will not be required to keep paying your premiums.
- When you pay premiums you should be entitled to cover you can actually use without running into complications. The waived premiums feature may help.
Indexation for inflation
This feature indexes your policy and increases your cover to keep up with inflation.
- You get to choose whether or not to accept the indexation each time, so there won’t be any unpleasant surprises and you can see the policy indexed at a rate that works for you.
- If you choose to accept the option, premiums are increased. If you choose not to, they won’t.
When might I be ineligible for income protection?
- You could be past the age limit. Insurers will weigh the likelihood of injury due to age. Insurers also put age restrictions on people wanting to sign up. If you are over the following age limits, then you are not eligible for an income protection policy. As a general rule: White collar employees have an maximum age of 64 years old and blue collar workers have a maximum age of 59 years old.
- You suffer from pre-existing medical conditions. If you suffer, or have suffered, from an injury or illness, you may need to look at other insurance options, such as accident-only insurance.
- A dangerous occupation. If you have a dangerous job like underground mining, are exposed to noxious chemicals, or are faced with increased mental and physical stress, you may be forced to choose other insurance options.
- Lifestyle choices. Extreme sports like skydiving or motor sports could see insurers reject your application.
Living expenses insurance is for almost everyone, but some people in particular might get more out of its benefits:
- Retirees can get cover even when not eligible for typical income protection or life insurance policies. Living expenses insurance can be taken out, and benefits will be paid, up to the age of 80. Meanwhile, it recognises disability according to your ability to perform daily tasks rather than to perform a job, and specific injury benefits can offer additional protection more affordably than combined life insurance.
- Casual and part time workers may be interested in living expenses insurance. If you don’t have the financial security to commit to a comprehensive life insurance policy but you’re still worried about what will happen if you’re unable to work, or who will cover costs should you die, living expenses insurance may be worth looking into.
- Homemakers and stay-at-home parents can finally get suitable cover with living expenses insurance. When a parent or a homemaker is unable to work, things can fall apart very quickly. Living expenses insurance can cover you, similar to how income protection insurance covers lost income, without you needing to prove your income.
- Individuals who perform dangerous duties.
What other alternatives are available?
General cover will provide you with up to 75% of your salary if you’re unable to perform daily living duties, such as washing, eating and moving. BT income protection offers a general cover option.
Accident-only cover provides up to 75% of your income if you become injured or disabled due to an accident. Accident-only cover also provides cover if you have a pre-existing medical condition.
These options will all help protect your income should you be unable to work and are ineligible for regular income protection insurance.
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