The Difference Between Waiting Periods and Benefit Periods in Income Protection Insurance
When it comes to Income Protection Insurance, there are a few terms you’ll hear frequently, but what do they mean? Understanding your Income Protection Insurance cover is essential and can make all the difference when submitting a claim with your cover.Â
While you may be familiar with how Income Protection Insurance can protect you, there are aspects of your coverage that can be negotiated to ensure that your cover is tailored to benefit you. A commonly asked question is: What is the difference between your Waiting Period and your Benefit Period? Â
Believe it or not, these two terms are significantly different and can impact your understanding of your Insurance cover if they are misunderstood. So, let’s break it down.
What is my Waiting Period?
The Waiting Period of an Income Protection Insurance cover is defined as the length of time you will need to have between when your absence from work commences due to your illness or injury, to when your insurance benefits and payments can begin. Your illness/injury will need to be certified by a doctor, and your waiting period will be considered from the date this is confirmed. The most common waiting periods to choose from are 30, 60, or 90 days, depending on the terms of your policy.Â
How your Waiting Period Impacts your Cover
Shorter waiting periods mean your funds will be available to you sooner, though they are usually associated with higher premiums. Whereas longer waiting periods reduce premium costs, they also mean that you will need to rely on savings or other support until you can access your benefits.Â
Regardless, your first benefit payment will be made to you in arrears. If your waiting period is 30 days, your first payment should be expected around 60 days after you stop working. When choosing your waiting period, it is important to consider your financial circumstances and how long you could comfortably afford to survive without your benefits if necessary. If you’re able to cover yourself financially for longer, your Income Protection Insurance may be lower in cost.
What is my Benefit Period?
The Benefit Period refers to the maximum length of time you can expect your Income Protection payments to be made to you if you remain unable to return to work for that particular claim. Typical benefit periods range from one to five years or up until a specific age, such as 65. A coverage that pays out until 65 will be more costly than a shorter-term benefit period of 1 year. There are policy limits that may apply to your cover. For instance, you need to meet your insurer’s definition of disability and other policy conditions to continue to receive payments, where a Maximum benefit period may apply.
You may also be offered a graduated benefit, depending on your insurer and cover, where, if you can return to work on a part-time basis, your benefit period will be extended until you’re able to return to work at full capacity.
How your Benefit Period Impacts your Cover
Choosing the most suitable Benefit Period for you is essential, as if you are still unable to work when your benefit period ends, your payments will stop. However, a longer benefit period (one that pays up until the age of 65, for example) will be more expensive. Your benefit period only applies to you whilst you are unable to work. So, if you return to work early, your payments will also stop. Choosing the right Benefit period for you depends on several factors, including your job security, age, health status and budget.
It is essential to understand that the Benefit period refers to a single claim and is one of the most significant factors in determining the cost of your cover.
Why choose Morgan Insurance Brokers?
Our team of experts are dedicated to ensuring that we provide you with the reliable advice that you need to make the right choices for your protection. Our approach to Insurance is one that you can trust. We know how complicated understanding your Income Insurance Protection cover can be; with us by your side, it doesn’t need to be.
Contact us today to find out more. We’d love to answer your questions.