What is Income Protection Insurance in Australia?

Did you check out Richard’s guest post on investing in Australia? He talks about the advantages of investing. For those living in Australia, it’s very informative. Plus, his site is even more informative.

Now back to today’s topic. More on life in Australia! You’re probably wondering why the focus on Australia? Well, I’ve always heard it’s an awesome country. Met some Aussies during our Carnival cruise and they were wonderful. Always wondered why life down under is so great.

So, when I ran into something called income protection insurance, it perked my interest. For us Americans, income protection insurance is very similar to disability insurance. I have this coverage through my work. Do you?

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Protect your income with Suncorp income insurance.

This insurance pays benefits to policyholders who are incapacitated and hence unable to work due to illness or accident.

Incapacity is defined by four bases including own, suited, any, and activities of daily living occupation. It’s different tiers that define what tier of incapacitated a person is. There are benefit limits define what percentage of your gross earnings you receive.

The claim has to be valid. I have a coworker at work who took a few months off to deal with a medical issue and received disability benefits. Another director was diagnosed cancer and he took a year off to deal with chemotherapy and recovery. He received disability benefits. Very glad he is back! From my research there usually is a deferred period- the time between a valid claim and the commencement of benefit payments.

Are there any restrictions?

Policies only pay out if the policyholder is unable to work due to illness or an accident.

Income protection in Australia will usually replace up to 75% of a person’s gross income.

There are two types of income protection including indemnity (provided by superannuation funds) and agreed value (pays out the benefit agreed to reflect your income at the start of your policy. it is not affected by fluctuations in income). Agreed value is the most expensive option. Superannuation funds are cheaper and offer less features and less flexibility.

You can determine how much you need by determining your monthly costs. Income protection insurance is meant to provide you an income to pay for your monthly costs.

Remember always become more informed before buying a policy and read the terms and conditions carefully.

Sources:

http://en.wikipedia.org/wiki/Income_protection_insurance

http://www.choice.com.au/reviews-and-tests/money/insurance/personal/income-protection-insurance.aspx

 

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