Month: September 2024

What does Income Protection Insurance Cover?

Within Australia, Income Protection Insurance is a financial safety net designed to replace a portion of an insured individual’s income if they become unable to work due to illness or injury. Income protection insurance provides regular monthly payments, typically replacing up to 70% of the insured person’s pre-tax income. 

These payments help cover essential living expenses, ensuring financial security and stability during the recovery period. As an individual with income protection insurance, in the event of an unfortunate event, you can still maintain your financial obligations whilst focusing on recovery without the added stress of lost income. 

How does Income Protection Insurance Work? 

With an income protection insurance policy in place, you can help ensure that you and your loved ones will not be left with a major financial burden if you were to lose your income. The benefit payment can be used for various daily, monthly, and unexpected expenses including: 

• Rent and mortgage payments
• Ongoing bills and everyday miscellaneous expenses
• Medical and rehabilitation costs 
• Transportation costs 
• The insurance premium itself 

To understand how income protection insurance works, it’s important to know the key aspects of its operations. 

Waiting Period 

When you first purchase an income protection insurance policy, you have the option to choose a waiting period. This period represents the time you need to wait after becoming unable to work due illness or injury before your insurance benefits begin.

The waiting periods usually range from 30 days to two years, with shorter periods generally leading to higher premium costs. You can choose to  tailor this to your financial capacity and savings, allowing you to manage expenses until the insurance payment commences. 

Benefit Period 

This refers to the duration for which the insurance will continue paying out benefits while you are unable to work. This can vary significantly depending on your chosen policy. Choosing an appropriate benefit period requires considering career longevity and potential health risks to ensure continuous financial coverage.

Claims & Payouts 

If you experience an illness or an injury that prevents you from working, you would typically file a claim with your insurance provider. Once the waiting period you selected elapses, and your claim is approved, you will begin receiving monthly payments, typically up to 70% of your pre-tax income. These payments can be used to cover various financial obligations. 

In essence, it operates as a financial safety net, providing you with income during times you are unable to earn due to health reasons. 

What Specific Expenses are Covered? 

Income protection insurance not only helps individuals cover the commitments listed below but also enables them to maintain their overall financial health by supporting their ability to save and invest during periods of income loss. 

Day-to-day living expenses

This would include everyday costs of living, such as groceries, utilities, and transportation.

Medical and rehabilitation expenses

These costs can quickly add up and include doctor’s appointments, treatments, and therapies.

Mortgage and other debt repayments 

Income protection benefits can help to prevent falling behind on loans for a house or car, as well as credit card payments. 

Insurance premiums 

This ensures the continuation of coverage from the policy during the benefit period.

This support is designed in such a way that it empowers individuals to focus on their recovery without the added stress of financial burdens. 

What does it Not Cover? 

Here’s a list of what income protection insurance does not cover: 

• Some pre-existing medical conditions 
• Injuries caused by self-harm 
• War and terrorist activities 
• Illegal activities 
• High-risk behaviours 
• Job loss 

Always remember to thoroughly read and understand exactly what your policy stipulates before making a decision to purchase. Our brokers can help you navigate the complexities involved to make the most informed choice and secure coverage that best policy that meets your needs. 

Why Choose Morgan Insurance Brokers? 

At Morgan Insurance Brokers, we are a team of professionals with a wealth of experience, knowledge, and skill in the field of insurance. 

As someone seeking income protection insurance, we understand how it might be complex to get all the coverage you need from a single, trusted source. Hence, we make it our mission to find the best coverage at the right price for your specific requirements. Our team of experienced brokers work with over 150 insurers, ensuring that you understand your options and can make an informed decision. 

We recently expanded to include income protection insurance as part of our service offerings. We recognise the importance of safeguarding your income in times of hardship so that you can keep up with your rent or mortgage payments, daily expenses, as well as not rely on friends, family, or other third parties for financial support. 

by Mojo Dojo