How does Income Protection Work?

Less than 1 min read

In the 2014-15 fiscal year, Australian workers lodged more than 107,000 serious injury and disease-related claims and were responsible for 77% of direct and indirect costs. Without adequate coverage, your financial livelihood and standard of living might suddenly be at risk.

An accident or illness could leave you unable to work and without an income to tend to yourself, your expenses, or your loved ones. Enter income protection insurance, a lifeline designed to offset some of the financial burdens following severe injury and illness.

Before you choose income protection cover that suits you, it’s important to understand how income protection works.

What is income protection?

Also known as salary continuance, income protection insurance can provide a regular monthly benefit of up to 70% of your income for the length of time determined when you took out your policy. This occurs when you are unable to work for an extended period of time due to illness or injury.

What are the benefits of income protection?

Your policy can provide financial protection for you and your loved ones, allowing you to focus on a speedy recovery and eventual return to work. It alleviates some of the stress associated with a sudden influx of expenses. Helping cover day-to-day costs like childcare, utilities and groceries to claim-specific costs like rehabilitation and medical care. Income Protection safeguards your quality of life and your savings account.

What does income protection cover?

Income protection policies cover up to 70% of your income to a maximum monthly benefit as defined in your policy PDS. This number is based on your average earnings during the previous 12 months.

Are life insurance add-ons worth it?

As with all insurance products, it depends on your unique situation. That said, life cover, total disability insurance and trauma insurance can 'beef up' your policy to ensure you have the most complete cover. Bundling insurance options can open up opportunities for savings too. Talk to a Lifebroker insurance expert to find out what is best for you.

Income protection can help you get back to the things that matter.

How much does income protection cost?

Cost is a key consideration when choosing a life insurance policy. The good news is that general income protection premiums are tax deductible, reducing your overall spend come tax time. Policy pricing will differ based on the type of income protection cover you choose. Depending on your situation (how stable your income is, for example), you can choose between an agreed-value policy (where you’ll confirm income and benefit amounts at time of application) and an indemnity policy (where you’ll report income at time of claim). You will also need to consider your waiting period, benefit period and if you would like stepped or level premiums.

When will I start receiving income protection payments?

When taking out income protection you will have to make a few decisions, including how long you will receive the benefit for and how long the waiting period is before your monthly payments start. Length of payment eligibility depends on the type of benefit period you choose. You can generally claim an illness or injury any number of times over your policy’s lifetime.

How does Lifebroker work?

At Lifebroker, our goal is to help you easily compare a broad range of life insurance products. We want to help you find the policy or packages that best fit your lifestyle and budget.

To deliver on this goal, we purpose-built an online comparison tool to provide you with a comparative snapshot of insurance products from leading life insurance providers in Australia.

Now that you know how income protection really works, it’s time you ask yourself if you and your family are properly protected. Chat to one of our insurance consultants today on 13 54 33.

This website offers General Advice only and does not consider your personal objectives, financial situation or needs. Before you purchase a product, it is important to read the relevant Product Disclosure Statements to consider if the product is appropriate for you.

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