Learn About What is Income Protection

For policies purchased after April 2020 the benefit to be paid on an Income Protection Claim is assessed by the insurance company considering other income you receive, any leave entitlements you have, and any other insurance you hold. The claim payment amount will be confirmed at the time you claim and will be based on your earnings over the previous 12 months. However, in some circumstances, such as maternity leave or casual employment, many insurance companies will assess your average earnings over a longer period.

Maximum income protection cover will usually be up to 70% of your income in the first two years, sometimes reducing to 60% after that. Some insurers offer a lower income replacement ratio (IRR%) which means they will only cover a lower amount of your pre-claim income.

The Waiting Period is the amount of time between your date of disability (when you had the incident that stopped you working) and the time your policy starts paying the claim. The shorter the waiting period, the more expensive the premium will be. When considering the right waiting period for you, you should consider:

• How much sick leave you have, and
• How long your savings or emergency funds will allow you to meet all your financial obligations.

The benefit period is the length of time your claim will be paid for. The longer the payout period the more expensive the premium will be. Available benefit periods can generally include 2 years, 5 years, and to Age 65. When considering the right benefit period for you, you should consider:

• Your current and future expenses such as day to day expenses, medical bills and school fees
• Your debts such as loans or credit cards that will need to be serviced

Note: not all insurers offer all benefit periods.

Income protection held outside Super can be tax deductible in some circumstances. Speak to your tax accountant if you are unsure whether you can claim a deduction.