Have you recently attained a number of quotes for income protection insurance and are unsure if you should go ahead? To help you make your decision, we’ve outlined some reasons you should go ahead and pay your premiums. Premiums are affected by a number of factors, but the main contributing factor is your income. If you believe that your income isn’t worth covering; it is useful to know that the pro’s far out weigh the cons. So in what circumstances is income protection insurance worth it? Here are some circumstances explored.
1. If your partner is unable to work
If your partner has a disability, meaning that they cannot work; or cannot find work due to a limited number of marketable skills, then it makes sense to insure your own income.
2. If you are a sole parent
Social security may provide a sort of safety net to ensure you don't starve, but if you have a mortgage and financial responsibilities, income protection insurance is very necessary.
3. Ongoing financial obligations
Income protection insurance can become important if you have financial responsibilities to your loved ones. These can include things like household bills, a mortgage or rent, credit card debt, personal loans and everyday living costs. The more financial responsibility you have, the greater the need for income protection insurance.
Wednesday, November 10, 2010
If you were to suddenly lose your income due to an injury or an illness that rendered you incapable of working, how long could you continue to support your household and maintain your mortgage and other commitments? For most people, whether they realise it or not, their most valuable asset is their ability to earn an income. Workers Compensation only covers you if you sustain an injury that is directly connected with work, but what if your injury happened at play, or if you couldn’t work because of illness? Most of the population could only go a month or two if their source of income was suddenly cut before their lifestyle would begin to suffer and their living conditions need to be altered significantly.
That’s where income protection can help. Income Protection Insurance ensures that you are not left financially devastated by illness or injury. It pays you up to 75% of your income until you recover or until the end of the benefit period. Talk to a consultant today and make sure you are fully covered to protect your biggest asset – your pay cheque.
That’s where income protection can help. Income Protection Insurance ensures that you are not left financially devastated by illness or injury. It pays you up to 75% of your income until you recover or until the end of the benefit period. Talk to a consultant today and make sure you are fully covered to protect your biggest asset – your pay cheque.
Income protection insurance provides peace of mind
Income protection insurance provides peace of mind, protecting your income in the unfortunate event that you become unable to work due to sickness or injury. The terms of your policy can be chosen to suit your individual circumstances, but most policies in Australia pay up to 75% of your gross salary and you are covered 7 days a week, anytime and anywhere in the world.
You can choose the duration of the benefit period, which can be anything from 2 years up to age 65 and you can also choose to be paid a lower monthly benefit should you not require the full 75%.
The price of the policy is dependent on a number of factors including the amount of your annual income, your age, gender and state of health, whether or not you smoke and what your occupation is. You can also choose a designated waiting period for the policy to start accruing the benefit which will also influence the cost of the policy.
You can choose the duration of the benefit period, which can be anything from 2 years up to age 65 and you can also choose to be paid a lower monthly benefit should you not require the full 75%.
The price of the policy is dependent on a number of factors including the amount of your annual income, your age, gender and state of health, whether or not you smoke and what your occupation is. You can also choose a designated waiting period for the policy to start accruing the benefit which will also influence the cost of the policy.
How Your Occupation Affects Your Income Protection Insurance
Most of us are at work for at least a third of our lifetimes (as if you could forget!), and our occupation has a significant impact on the likelihood of needing to make an income protection insurance claim. As such, life insurance companies usually use an occupation category or code as a factor in determining your premiums. Today we explore those occupation codes and the logic behind them a little more carefully.
What occupation categories exist?
This varies immensely by insurer. Some income protection companies have only 3 occupational categories, some have as many as 8. For instance, you might have to choose between:
• Manual
• Skilled Tradeperson
• Non-manual
Or you might have to be more specific about your skills and experience:
• Professional white collar workers whose job requires tertiary qualifications
• Medical and allied health professionals
• Clerical or administrative workers
• Light manual workers (for example, supervisors of manual workers)
• Fully qualified skilled tradespeople
• Unqualified tradespeople doing light or medium manual work
• Unqualified tradespeople doing heavy manual work
• Home duties
• Accountants are sometimes classified separately
What aspects of my income insurance does my occupation affect?
The most notable difference in income insurance between different occupations is the premium. However, there are also other factors that may be affected:
• Some occupational classes may not be eligible for as long benefit periods - for example, an income protection insurance plan might only offer a 2 or 5 year benefit for manual labourers compared to what is offered for office workers
• The maximum entry age may differ - if you're a heavy manual labourer you may only be able to get cover before a certain age, however this generally depends on the insurer.
• Some income protection insurance policies place more stringent 'disablement' requirements on occupation categories that trend towards manual labour. For example some insurers will pay certain occupations a benefit after the selected waiting period if they are either partially or totally disabled, whereas other occupations will only receive a benefit if they are totally disabled.
• There may be different maximum sums insured for different occupational categories
With all these points in mind, it is therefore best to talk to a financial adviser to find the most suitable income protection insurance policy for your situation.
What occupation categories exist?
This varies immensely by insurer. Some income protection companies have only 3 occupational categories, some have as many as 8. For instance, you might have to choose between:
• Manual
• Skilled Tradeperson
• Non-manual
Or you might have to be more specific about your skills and experience:
• Professional white collar workers whose job requires tertiary qualifications
• Medical and allied health professionals
• Clerical or administrative workers
• Light manual workers (for example, supervisors of manual workers)
• Fully qualified skilled tradespeople
• Unqualified tradespeople doing light or medium manual work
• Unqualified tradespeople doing heavy manual work
• Home duties
• Accountants are sometimes classified separately
What aspects of my income insurance does my occupation affect?
The most notable difference in income insurance between different occupations is the premium. However, there are also other factors that may be affected:
• Some occupational classes may not be eligible for as long benefit periods - for example, an income protection insurance plan might only offer a 2 or 5 year benefit for manual labourers compared to what is offered for office workers
• The maximum entry age may differ - if you're a heavy manual labourer you may only be able to get cover before a certain age, however this generally depends on the insurer.
• Some income protection insurance policies place more stringent 'disablement' requirements on occupation categories that trend towards manual labour. For example some insurers will pay certain occupations a benefit after the selected waiting period if they are either partially or totally disabled, whereas other occupations will only receive a benefit if they are totally disabled.
• There may be different maximum sums insured for different occupational categories
With all these points in mind, it is therefore best to talk to a financial adviser to find the most suitable income protection insurance policy for your situation.
Self Employment and Income Protection Insurance Explained
Those of us who are self-employed understand that in addition to all the benefits - such as freedom, control, self-determination and wearing your PJs to work occasionally - there are also some unexpected drawbacks! One of the infrequent, but not insignificant drawbacks is the effort it takes to obtain financial services. Tax is more difficult, getting a loan can be near impossible, and insurance policies also tend to be more involved. However, income protection insurance is more essential for the self-employed than any other income-earning group, so today we help demystify it.
The Basics
Most of the advice that exists about income protection insurance for ordinary employees also applies to the self-employed. For example:
• The maximum cover level is still set at 75% of your regular income
• You will need to select a waiting period
• You still need to choose between stepped and level premiums
• You'll still need to decide whether an agreed value policy or an indemnity policy will work best for you
Agreed Value or Indemnity Policy?
The choice between agreed value and indemnity policies is more critical with income protection insurance for the self-employed. In short, your best choice will be determined by your particular circumstances. So, if:
Your income varies wildly from month to month: Go with an agreed value policy; if an accident occurs in a down time you could be left with no payout.
Your income is fairly stable: An indemnity policy is cheaper, and if you can rely on your income to remain steady you can rely on the policy to pay out a reasonable amount. If you want extra peace of mind, though, it would also be reasonable to choose an agreed value.
You expect your income to rise: You should consider an indemnity policy; they are cheaper initially and with your income only on the up it means there is less possibility of you earning less than your sum insured.
Basic Income Protection or Business Expenses Cover?
Many income protection insurers offer an additional option for self-employed people - it may be called 'Business Overheads Cover' or ‘Business Expenses Cover’.
This option will be important for those who have mortgaged an office, or who have high additional fixed overheads that will be incurred even if you aren’t working. However, in most policies the business overheads are an additional benefit the policy may cover.
A Business Expenses Insurance benefit is specifically designed for self-employed individuals (employed full-time) who need to ensure that the fixed expenses of their business or practice will still be paid even if they cannot work due to injury or sickness. The benefit covers business expenses less any amounts reimbursed from elsewhere. You can purchase this cover on its own or together with an income protection insurance policy.
Business Expenses Insurance generally covers things like accounting fees, rent & property taxes, leasing costs of plant and equipment, salaries and associated costs, utilities and phone costs. It does not cover salaries or bonuses paid to yourself, capital costs, real estate depreciation, investment losses, or repayment of principal of any loan or other finance agreement.
The Basics
Most of the advice that exists about income protection insurance for ordinary employees also applies to the self-employed. For example:
• The maximum cover level is still set at 75% of your regular income
• You will need to select a waiting period
• You still need to choose between stepped and level premiums
• You'll still need to decide whether an agreed value policy or an indemnity policy will work best for you
Agreed Value or Indemnity Policy?
The choice between agreed value and indemnity policies is more critical with income protection insurance for the self-employed. In short, your best choice will be determined by your particular circumstances. So, if:
Your income varies wildly from month to month: Go with an agreed value policy; if an accident occurs in a down time you could be left with no payout.
Your income is fairly stable: An indemnity policy is cheaper, and if you can rely on your income to remain steady you can rely on the policy to pay out a reasonable amount. If you want extra peace of mind, though, it would also be reasonable to choose an agreed value.
You expect your income to rise: You should consider an indemnity policy; they are cheaper initially and with your income only on the up it means there is less possibility of you earning less than your sum insured.
Basic Income Protection or Business Expenses Cover?
Many income protection insurers offer an additional option for self-employed people - it may be called 'Business Overheads Cover' or ‘Business Expenses Cover’.
This option will be important for those who have mortgaged an office, or who have high additional fixed overheads that will be incurred even if you aren’t working. However, in most policies the business overheads are an additional benefit the policy may cover.
A Business Expenses Insurance benefit is specifically designed for self-employed individuals (employed full-time) who need to ensure that the fixed expenses of their business or practice will still be paid even if they cannot work due to injury or sickness. The benefit covers business expenses less any amounts reimbursed from elsewhere. You can purchase this cover on its own or together with an income protection insurance policy.
Business Expenses Insurance generally covers things like accounting fees, rent & property taxes, leasing costs of plant and equipment, salaries and associated costs, utilities and phone costs. It does not cover salaries or bonuses paid to yourself, capital costs, real estate depreciation, investment losses, or repayment of principal of any loan or other finance agreement.
What Happens Under My Term Life Insurance, Income Protection and Trauma Insurance Policies if I am diagnosed with Cancer?
As a group of diseases, cancer is one of the leading causes of disablement and death in Australia. Term life insurance, income protection and trauma insurance companies are all well-versed in handling claims due to cancer - today we look at what is likely to happen after a diagnosis of cancer if you hold any of the above policies.
Term life insurance
Most policies will pay out a lump sum on the diagnosis of a terminal illness where your life expectancy is less than 12 months. Some insurance companies may require you to visit a doctor employed by the life company to confirm your diagnosis.
income protection insurance
Upon diagnosis you may be required to provided a medical certificate from your doctor stating the period for which you were unable to work due to illness from cancer, or cancer treatment Benefits will start being paid as long as you are still suffering sickness from cancer, or needing cancer treatment and unable to work, or until your benefit period runs out.
Trauma insurance
For most insurers Australia-wide, cancer is a condition where the majority of claims are paid.
There are some special conditions with cancer payouts, mostly relating to the severity of the illness. For example, most diagnoses of malignant cancers will generally warrant a claim of the full covered amount under your trauma insurance policy. However, depending on the Life Insurance Company, diagnoses of benign tumors or carcinoma in situ (a precursor of malignant or invasive cancers) may only warrant a partial claim.
Nonetheless you need to be aware that you are only covered for conditions defined in your policies PDS (product disclosure statement). Each policy may have varied definitions relating to cancer. You should always make sure that you fully understand the insurance cover you have taken out has adequate cover for your needs.
Term life insurance
Most policies will pay out a lump sum on the diagnosis of a terminal illness where your life expectancy is less than 12 months. Some insurance companies may require you to visit a doctor employed by the life company to confirm your diagnosis.
income protection insurance
Upon diagnosis you may be required to provided a medical certificate from your doctor stating the period for which you were unable to work due to illness from cancer, or cancer treatment Benefits will start being paid as long as you are still suffering sickness from cancer, or needing cancer treatment and unable to work, or until your benefit period runs out.
Trauma insurance
For most insurers Australia-wide, cancer is a condition where the majority of claims are paid.
There are some special conditions with cancer payouts, mostly relating to the severity of the illness. For example, most diagnoses of malignant cancers will generally warrant a claim of the full covered amount under your trauma insurance policy. However, depending on the Life Insurance Company, diagnoses of benign tumors or carcinoma in situ (a precursor of malignant or invasive cancers) may only warrant a partial claim.
Nonetheless you need to be aware that you are only covered for conditions defined in your policies PDS (product disclosure statement). Each policy may have varied definitions relating to cancer. You should always make sure that you fully understand the insurance cover you have taken out has adequate cover for your needs.
7 Watchpoints When Comparing Income Protection Insurance
Comparing income protection insurance can be difficult even for experts. Most people feel that they simply don't have the time to properly review every Product Disclosure Statement or Policy Document ... and this can put you in a dangerous position. Today we make the comparison and choice process far easier, continuing our list of critical watch-points when buying income protection insurance. Check these items off your list, and you can be assured that you won't be caught unawares.
1. What benefit periods are available?
You should be able to choose between a range of benefit periods (with standard lengths including 2 years, 5 years, and to age 65) with good income protection insurance companies. Companies that offer benefits to age 65 will naturally be more expensive.
2. Does the policy offer premium waiver while on claim?
Good income protection insurance policies will waive your premiums while you’re on claim, and will not require you to pay premiums. Good quality policies won't require you to pay extra for this feature.
3. Does the policy cover 'Totally Disabled' and 'Partially Disabled'?
Most income protection insurance policies cover 'Partial Disability' and ‘Total Disability’ however definitions will vary between insurers. If you work in a slightly more hazardous occupation you may decide that your policy will need exceptional ‘Partial Disability’ and ‘Total Disability’ definitions. Check the product disclosure statement’s to compare these definitions and find out which suits your needs best..
4. Is there a time limit of Partial Disability payments?
There is no time limit as such, as partial disability payments are paid according to your benefit period as outlined in your policy. Benefit periods can vary, however they are usually either 2 years, 5 years, or until age 65. In comparison, some general insurance policies pay a benefit for a limited period of time only.
5. Are rehabilitation benefits available?
If you live paycheck to paycheck, your finances may not cope with the additional medical expenses incurred because of injury or illness. Income protection insurance policies with rehabilitation benefits can help.
6. What sort of exclusions exist for the policy?
Most income protection insurance policies will not pay claims for injuries or illnesses that are considered to be self-inflicted, occurred while conducting an illegal activity, were a result of military service or of normal pregnancy or childbirth. These exclusions are actually in your interests - claims paid for these reasons would eventually drive up premiums for every customer insured with the company.
7. How are psychological conditions treated?
Psychological conditions are not treated any differently when compared with other illnesses or injuries. It all really depends on whether your policy covers this or not. You can find out if psychological conditions are covered by reading the product disclosure statement; be on the look-out for words like mental health or mental illness. If you believe you do not need this feature in your income protection policy, some insurers offer premium discounts if you are happy to have a mental health exclusion placed on your policy.
1. What benefit periods are available?
You should be able to choose between a range of benefit periods (with standard lengths including 2 years, 5 years, and to age 65) with good income protection insurance companies. Companies that offer benefits to age 65 will naturally be more expensive.
2. Does the policy offer premium waiver while on claim?
Good income protection insurance policies will waive your premiums while you’re on claim, and will not require you to pay premiums. Good quality policies won't require you to pay extra for this feature.
3. Does the policy cover 'Totally Disabled' and 'Partially Disabled'?
Most income protection insurance policies cover 'Partial Disability' and ‘Total Disability’ however definitions will vary between insurers. If you work in a slightly more hazardous occupation you may decide that your policy will need exceptional ‘Partial Disability’ and ‘Total Disability’ definitions. Check the product disclosure statement’s to compare these definitions and find out which suits your needs best..
4. Is there a time limit of Partial Disability payments?
There is no time limit as such, as partial disability payments are paid according to your benefit period as outlined in your policy. Benefit periods can vary, however they are usually either 2 years, 5 years, or until age 65. In comparison, some general insurance policies pay a benefit for a limited period of time only.
5. Are rehabilitation benefits available?
If you live paycheck to paycheck, your finances may not cope with the additional medical expenses incurred because of injury or illness. Income protection insurance policies with rehabilitation benefits can help.
6. What sort of exclusions exist for the policy?
Most income protection insurance policies will not pay claims for injuries or illnesses that are considered to be self-inflicted, occurred while conducting an illegal activity, were a result of military service or of normal pregnancy or childbirth. These exclusions are actually in your interests - claims paid for these reasons would eventually drive up premiums for every customer insured with the company.
7. How are psychological conditions treated?
Psychological conditions are not treated any differently when compared with other illnesses or injuries. It all really depends on whether your policy covers this or not. You can find out if psychological conditions are covered by reading the product disclosure statement; be on the look-out for words like mental health or mental illness. If you believe you do not need this feature in your income protection policy, some insurers offer premium discounts if you are happy to have a mental health exclusion placed on your policy.
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