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If you're thinking about a second income protection policy, you can compare more options for cover below. Make sure you take note of the waiting periods. You might consider having a different waiting period for each policy.
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Income protection benefits are capped at 75% of your income. This means if you have two income protection policies and claim on both, your total payout from both will still equal 75% of what you earn. So by having more than two policies, you may be paying for benefits you won't receive. This doesn't mean that you shouldn't have more than one though.
An adviser can help you find cover from trusted life insurance brands.
People choose to have multiple income protection policies to help them manage short and long-term financial loss that might be caused by illness or injury. A common strategy is to:
The benefit amount that you can insure with Australian income protection plans is up to a maximum of 75% of your gross annual income. Your annual income may include:
Some insurance providers may offer an excess of up to 15% in cover; however, the additional amount must be used as superannuation contributions.
You are only covered for up to 75% of your income because there should be an incentive for you to want to return to full-time employment when you have fully recovered. Income protection should be treated as a form of support while you are temporarily disabled, so you have the financial capability to cover basic necessities and maintain your family's lifestyle.
In Australia, income protection is designed to cover a percentage of your income. Insurers will generally cover up to 75% of your income to incentivise you to return to work. This usually means your combined amount would be capped at that percentage.
If you have two income protection policies – one within your superannuation fund and another outside super, the limitation on the benefits you receive each month will still apply. However, some super funds may offer an extended waiting period feature, which allows you to receive the benefit payments from your income protection policy inside super, even when you have another cover in place with your other insurance provider.
You may choose to receive your benefits at the end of your super policy waiting period. However, with extended waiting period, you may receive your payments from the policy inside super fund once the benefits from the other insurance provider cease. You must continue to be disabled to receive the benefits.
It is important to note that not all superannuation fund offer this feature. Consult with your respective super fund if you have any doubts with owning multiple policies – inside and outside superannuation environment.
Insurance providers are able to share information about customer's claim histories and so it is important to disclose any relevant information, including whether you have existing policies. If an insurer discovers that you have not disclosed information such as this, your claim payout may be impacted negatively.
When you lodge a claim on your income protection policy, your insurance provider must follow specific guidelines in order to process your claim. Once you notify your insurer that you will be lodging a claim, you will also be required to complete a claims form and submit any relevant documentation required to lodge the claim, such as doctor's report and proof of income.
It is very important to be completely honest with the details that you submit in your claim. All providers will verify all the details provided in your claim and they will thoroughly investigate all the documents to ensure that you are not making a fraudulent claim.
Your insurer will ask whether or not you have made or intend to make a disability claim with any other insurers or organisations, such as Centrelink or worker's compensation. This ensures that the insurer is able to adjust the benefit payment accordingly so that no more than 75% of your regular income is provided.
Remember that failure to disclose information that you have more than one income protection policy may result in your claim being rejected and the insurance provider may choose to void your cover.
Income protection insurance provides coverage in the event that you are unable to work and earn an income, as a result of a serious illness or injury. It offers financial support to replace your lost income in a form of monthly benefit payments of up to 75% based on your regular wage.
There are many advantages of having income protection in place; comprehensive policies offer many fringe benefits that you can tailor to your needs, such as (and not limited to):
You may want to consider the benefit of having one income protection policy in place instead of multiple policies at once. With a single income protection policy, you have the flexibility to tailor your plan as comprehensive as you want it to be, and you only need to keep on top of premium payments on one policy. If you have multiple plans, chances are you may need to pay more in premiums, or sacrifice some great benefits to reduce the premiums, and deal with the inconvenience of managing multiple policies.
However, if you are still considering a multiple policy approach to manage your short-term and long-term needs at a time of disability, consult with an insurance consultant to obtain a tailored advice on whether or not this strategy is suitable to your situation.
Willam Eve is the country manager for Finder's Canada operations. He has previously held the positions of group publisher of insurance for Finder Australia and lead publisher for the Finder global team. William has a Bachelor of Communications from the University of Technology Sydney, Australia. He loves the challenge of launching Finder into new markets while helping grow Finder’s global team.
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I have a personal income protection policy and my employer also has provided one for the workers of their company can I claim both if illness prevents me being able to work for some time.
I thought I only had one income protection insurance, however I’ve realised that I have 3, 2 of which I took out some years ago.
Reading the exclusions it’s confusing as to whether I can claim on all 3 policies or whether one negates the other.
Can you advise.
Hello Lynn,
Good day! Appreciate you contacting finder regarding your inquiry today.
Generally, when you have more than once income protection policy in place, you will be able to claim from more than one income protection policy but your insurers will reduce your benefit amount by any compensation received from other sources.
It’s a good idea to get in touch directly with your insurers to get a clearer view regarding exclusions and restrictions on claiming as it varies per insurance provider.
Hope this helps!
All the best,
Ron
Hi Richard,
Thank you for your question.
You will be able to claim from more than one income protection policy.
Note: At the time of claim, your insurer will ask whether or not you have made or intend to make a disability claim with any other insurers or organisations, such as Centrelink or worker’s compensation. Your insurer may adjust the benefit payment in relation to the second payment.
It’s a good idea to get in touch directly with your insurer to get a more clear view on this matter.
All the best,
Zubair