Income Protection Insurance in Australia acts as a financial buffer, offering a replacement income stream for individuals who are unable to work due to illness or injury. Instead of directly replacing lost income, it provides a monthly benefit, typically up to 70% of the insured person’s pre-tax income.

This benefit helps you manage a variety of financial commitments, from daily living expenses and medical bills to mortgage repayments and insurance premiums.

This safety net ensures that individuals can prioritise their recovery without the added burden of financial strain. It provides a sense of security, allowing individuals to focus on regaining their health while maintaining their financial stability and meeting their financial obligations. Like most insurance coverages, it acts as a personal rainy day safety net. 

What does it Include? 

Each income protection policy has a definition of partial or total disability that must be met before a claim can be made, and it is important to check with your insurer for their specific definitions. 

Some of the most common things that income protection insurance cover includes: 

• Injuries or illnesses that prevent you from working, as long as they are not listed as a specific exclusion in your policy.
• A percentage of your regular income while you are unable to work, allowing you to cover your living expenses. 

Additionally, many policies offer coverage for rehabilitation services and ongoing medical treatments, providing a more inclusive safety net during your recovery period.

What income protection does not cover?

While income protection insurance acts as an essential safety net for individuals in cases of injury, and illnesses it does not cover everything. Pre-existing conditions, self-inflicted injuries, criminal activitiies, risky activities, elective surgery, and unemployment are the main circumstances that income protection does not cover. It’s important to note that just like most insurance policies, income protection insurance has its own list of exclusions too. 

Here’s a list of the most common exclusions of what income protection does not cover:

Pre-existing medical conditions 

Many income protection plans have limitations or exclusions related to pre-existing medical conditions. It’s essential to disclose any pre-existing conditions when applying for coverage, as failure to do so could result in a claim being denied. 

Self-inflicted injuries 

Intentionally self-inflicted injuries are excluded to prevent misuse of coverage. However, some providers may cover injuries resulting from a mental condition.

Pregnancy and Birth

Income protection insurance typically excludes coverage for normal pregnancy and childbirth. This means that any time off work due to these reasons won’t be compensated under such policies, including maternity leave. You can refer to the governments fairwork policy on parental leave to determine if you are eligible for maternity or paternity leave entitlements.

Acts of war and terrorism 

Income protection typically excludes injuries or illnesses resulting from war, as these situations are too unpredictable and broad for standard insurance coverage.

Criminal activities 

Participation in illegal activities typically will lead to exclusion from coverage for any resulting injuries or illnesses. 

Risky activities 

Income protection policies may exclude coverage for injuries or illnesses sustained while participating in activities deemed risky. However, what is specifically classified as ‘risky’ will vary between insurance providers. 

Unemployment 

Situations related to job loss such as seasonal, self-administered, or the end of a fixed-term contract unemployment are typically not covered. 

Voluntary elective surgery or treatment 

Many insurance policies exclude or limit coverage for elective surgeries and non-emergency treatments. This means procedures that aren’t medically necessary might not be covered.

It’s crucial to thoroughly review the terms and conditions of any income protection policy to understand the specific exclusions and limitations. Seeking advice from insurance brokers can be helpful in understanding these details and selecting the most appropriate coverage for you. 

Why Choose Morgan Insurance Brokers? 

At Morgan Insurance Brokers, our team brings extensive experience, knowledge, and expertise to the insurance industry.

Navigating the complexities of income protection insurance can be challenging, especially when seeking comprehensive coverage from a reliable source. We actively work to secure the best coverage at the right price, tailored specifically to your needs. Morgan Insurance also provides ourselves on education. We like to educate our clients on such topics such as what income protection does not cover.

We have recently expanded our services to include income protection insurance because we recognise the critical importance of protecting your income during challenging times. This coverage helps ensure you can meet your rent or mortgage payments, manage expenses, and avoid relying on friends and family.

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