With regards to building wealth and being able to fund your current lifestyle expenses, one of the most valuable resources you have is your ability to bring in a steady income. If you found yourself unexpectedly not being able to work for an extended period of time due to injury or illness, Income Protection could make provision for protecting your current earning capacity.
When establishing an Income Protection policy, a number of crucial aspects are taken into consideration, including:
- Benefit period
- Sum insured amount
- Waiting periods
- Structure of ownership (is it non-super, super or super-linked?)
- Agreed vs. indemnity
- Level vs. stepped premiums
- Exclusions, pre-existing health conditions and loadings
Other essential factors include any particular provisions that you would like to hold within your Income Protection Insurance policy. In most cases, these provisions can be assigned into:
- Supplementary provisions – these are other definitions and features that are secondary considerations when confirming the need to have Income Protection. For instance, an Income Protection Insurance policy that also pays a predetermined Specific Injury Benefit if you had to experience one of a list of injuries such as loss of use of a limb, bone fractures etc.
- Core provisions – these are definitions and features that are classified as being primary considerations when confirming the need for Income Protection. For instance, an Income Protection Policy that can replace your income in the event of you unexpectedly not being able to work for a specific period of time because of illness or injury
Deciding to opt between an Income Protection policy that is either focused entirely on delivering core provisions or one that makes allowance for supplementary and core provisions could come down to a benefit vs. cost scenario, along with your particular preference for insurance cover.
You will be provided with enhanced coverage when choosing Income Protection that combines supplementary and core provisions. However, you will have to be willing and able to pay the higher insurance premiums required to take advantage of it. For instance, with regards to enhanced coverage, the following definitions and features that will be mentioned here are normally only available in cases where supplementary provisions and form part of an Income Protection Insurance policy.
It is crucial to keep in mind that insurance policies and their associated benefits will differ from one insurer to another. As a result, you must always read your Product Disclosure Statement and Income Protection Insurance policy carefully before signing anything.
Specified Injury Benefit
This type of benefit is paid to you when you experience one of a list of injuries such as loss of a limb, loss of use of a limb, limb fractures etc. – regardless of whether you are still able to work and earn your regular income or not.
The payment – which is equal to the monthly sum insured amount – of this benefit can vary from between one month and five years, depending on the type of injury that has occurred.
For instance, if you had to experience a leg fracture (excluding that of the ankle), this benefit would then be paid to you for two months. Permanent and complete loss of use of one foot or hand or vision in one eye would see your benefit being paid out for a period of 12 months.
You will stop receiving payments from your Special Injury Benefit on the earliest date of events such as:
- Your benefit period coming to an end
- The benefit reaching the end of its predetermined injury benefit payment period
- Your policy coming to an end
This specific benefit provides a payment to help with accommodation expenses in the event that an immediate member of your family needs to travel from where they live to be by your side if a certified doctor because of injury or illness has officially confined you to bed.
An amount of up to $250 per day for a maximum of 30 days will be paid out if the immediate family member has to travel more than 100 kilometres from their official place of residence to be with you.
Bed Confinement Benefit
The Bed Confinement Benefit will usually be paid out if you have been medically confined to bed because of injury or illness for a minimum timeframe – for instance, three days or longer, and you are officially under the care of a registered nurse (as instructed by a doctor).
Once the minimum timeframe has come to an end, a portion of the sum insured amount (for example, 1/30th for every day you have been confined to bed) will be payable for a predetermined period of time along with the standard sum insured amount.
This specific benefit will normally come to an end on the earliest of these events occurring:
- After 90 days have passed
- If you are no longer officially confined to bed
- When the specified waiting period comes to an end
- When your insurance policy comes to an end
Child Care Benefit
This benefit helps reimburse the expense of childcare fees that cannot be recovered from an alternative source and that are incurred as a result of you not being able to work due to injury or sickness, and you need extra assistance with childcare from a licensed childcare provider.
The amount that will be reimbursed will be payable for a maximum timeframe (say three to six months) over the life of the policy in question and the amount paid is normally the lesser of:
- $400 – $500 per month
- 5% of the sun insured amount
- The extra childcare costs experienced, minus any amounts that can be recovered from other sources
It is important to keep in mind that no two Income Protection offerings provided by different companies will offer the same benefits. While some may offer the benefits mentioned above, others might not – or they may provide more benefits than those mentioned. As a result, it is crucial that you read through and fully understand all of the documentation associated with your particular Income protection Insurance policy. Ensuring that you know exactly what you will be covered for in the event of illness or injury occurring will provide you with tremendous peace of mind if you need to lodge a claim.