9-point Checklist for Selecting Income Protection Insurance - Coast and Country Insurance
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9-point Checklist for Selecting Income Protection Insurance

If you were to become injured or ill and couldn’t work, what would happen to those dependent on your income? While we don’t like to think about these possibilities, we need to weigh up the risk of becoming ill or even permanently disabled in terms of the impact this would have on ourselves or our families. 

While income protection insurance is designed to offer protection if you become ill or are injured either on or off the job, it is an important consideration for those working in high-risk jobs. 

Income protection insurance is a policy you take out with an insurance provider that requires you to make monthly payments. The policy is designed to replace some of your income if you’re unable to work due to injury or illness. 

In the event of a successful claim, income protection will pay you a benefit of up to 75% or so of your regular income until either you return to work, your agreed benefit period ends, or you turn a certain age (usually around 65 to 70 years old), depending on your policy. 

Unlike most other types of insurance, income protection premiums are tax-deductible and are usually available to take out either inside or outside of your superannuation. 

Your policy will be made up of three main factors that affect the coverage and the cost: 

  • Benefit amount – the amount you are covered for each month. 
  • Benefit period – the length of time benefits will be paid for. 
  • Waiting period – the length of time before benefits start being paid. 

Income protection is a complex product and it is advised that you seek professional advice as opposed to ‘going it alone’. There are numerous examples of people not being clear on the details of their income protection insurance and being denied claims when they need them the most. 

The following checklist is helpful in being able to assess the overall quality of an income protection policy: 

1/ Wide coverage – check the product disclosure statement of your insurance policy to see whether it covers a wide range of illnesses and accidents. 

2/ Waiting periods – how long do you need to wait before you receive benefits? Usually a three-day waiting period offers a good balance between quality and cost. 

3/ Premium waiver – a good-quality policy will allow you to waive premium payments while receiving benefits. 

4/ Definition of disabilities – make sure that definitions of disability are made clear from the beginning. 

5/ Specific benefits – some policies feature benefits that are occupation-specific such as special cover for work-related injuries in the construction or healthcare industries. 

6/ Additional benefits – you should also check for benefits such as accommodation or travel costs, or in-home care services. 

7/ Choice of benefit period – you should have the ability to choose how long you wish to receive benefit payments. The longer your benefit period the more you will have to pay for cover, so if you can afford to do so, consider selecting a shorter benefit period. 

8/ Shop around – some providers will offer multi-policy discounts and combined cover discounts, as well as savings for paying premiums annually. 

9/ Review regularly – just as you wouldn’t select the first policy you come across, it’s important to keep assessing the suitability of your policy, as you may need to lower your level of cover or find a better value product. 

Contact us for more information and advice on income protection insurance. 

General Advice Warning: The content of this article is general advice only and should not be acted upon without first consulting an industry specialist as it does not take into consideration your personal needs, objectives or financial circumstances.