Income protection

What is Income protection Insurance?

Income protection insurance will provide an income stream should the unthinkable happen and you cannot work due to a sickness or accident.

There are various income protection policies in the market place with varied salary insurance options. In fact, this is the most complicated insurance an individual can purchase with various features and benefits to choose from.

Tick the wrong box on your application and you can miss valuable benefits! If you are unfortunate enough to fall ill or have an accident please call us and we will help you determine if you are covered by your policy.

Here is a true story from one of our clients who broke his arm and didn't call us. When we were talking on another Financial Planning issue he told us he broke his arm and we were able to quickly identify he would receive 2 months wages and he hadn't even lost a day off work!

We call this our priority claims service. Check out what some of our customers say when they have used our service.

We as experienced advisers can help you determine the best options for your income protection insurance and shop around for the best price.

What is Income protection for?

It should cover you for all your monthly expenses while you are unable to work. A good guide is it generally insures up to 75% of your gross income.

For the self employed your income protection policy can cover your gross business income as a result of your efforts less your share of business expenses. We can generally include items like, depreciation, donations, car expenses, income splitting etc. Again self employed cover is complex so one of our advisers will be able to help you determine what you can and cannot be insured for.

How can you save on your Income Protection premiums?

Insure for what you need. If you have 3 months of sick leave or a several months of holiday leave due you could use this as a buffer before you need to claim on your Income protection policy. By opting for a longer waiting period, let's say 90 days, you can save 25% off your premiums!

There are also standard and plus policies in the market place.

Income Protection Standard covers you if you are sick or have had an accident and cannot work till your benefit period, usually age 65. This is the cheapest type of Income protection although for most people we don't recommend this.

Income Protection Plus will also cover the above but include extras like the following:

• Advance payments (when you need it most) during the waiting period, like


• Day 1 accident cover and day 3 Bed Confinement Cover.


• Accommodation benefit.


• Double Income benefits for trauma conditions.


• Advance lump sum benefits for broken bones etc.


• Rehab benefits.


• Home Assist and transportation benefits.

Choice of Income Protection Definition

As long as you generally meet three criteria's (this is the most common definition in the market place)

1. Seeing a Doctor because you are sick of have had a accident


2. Not working


3. And can't do at least 1 important duty of your own occupation

Or some companies are now promoting an hour's based definition. This means you can still work to a maximum of 10 hours per week and you will still receive 100% of your wage insurance benefit.

As this is easier to qualify for the premiums are of course dearer in most cases.

What's new for Income protection?

Recently the government allowed Super funds to provide Income Protection benefits to age 65 (and claim a tax deduction) although you cannot include extra benefits like trauma cover as these are deemed not to meet the purpose of what super was designed for. Although two distinct advantages of purchasing your Income protection via super are:

• Reduces the impact on your cash flow


• If you claim your income protection benefit this does not offset your centre link entitlements.

Again this is a complex area so please see one of our advisers for tailored advice.

Beware of cheap imitation Income protection policies like Accident and Sickness Insurance

Accident and Sickness Insurance is similar to Income protection i.e. provides up to 75% of your monthly gross income as a benefit if you are unable to work due to sickness or injury. Although it is usually offered by general insurance companies and bundled with a business Insurance pack.

However, if the Insurance Company decides that you pose a great a risk (usually due to you just making a claim on your policy) they can elect to not offer you insurance from the next renewal date. These are known as cancelable contracts and we do not recommend these.

However, with Income protection once the policy has been underwritten and accepted the Insurer cannot cancel the cover (as long as you fully disclosed all your previous medical conditions) , even if a claim is made and or your circumstances change like a new higher risk occupation and or your health deteriorates.

Sickness & Accident Cover was considerably cheaper to purchase, easier to obtain (as there were no medicals or health questions) and Sickness & Accident could cover certain occupations that Income Protection would not cover.

Although recently the difference in premiums between the two types of policy has significantly reduced due to a change in underwriting guidelines (Life Insurers are now willing to take on more cases and continual improvements in medical science).

For more information on either Income Protection or Sickness and Accident Cover speak to one of our advisors.