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Have you thought about how you might pay the bills and support your family if you cannot work because you are injured or unwell – be it temporarily, or permanently? In this increasingly uncertain world, some people opt to get income protection or salary continuance insurance, which can provide an alternative source of income. As with total and permanent disability (TPD) insurance, you may have purchased a policy directly from an insurer, or you could have it through your super fund. Anyone who has been without income for any period knows how stressful this can be – having to read through jargon-filled policies and documents to understand how you can claim on your insurance policy only makes matters worse.
Don’t worry – Littles has got you covered! This blog sets out what you need to know about how income protection insurance works, and what you need to do if you have to make a claim.
Want to know the difference between income protection insurance and TPD insurance? Read here.
It does matter! Let’s start with the basics. Income protection benefits are all intended to provide you with income if you get sick or injured and are forced to stop working, permanently or temporarily. However, not all policies are created equal! The terms and conditions of different income protection policies can vary significantly.
Take Policy A. It provides that income protection benefits are paid as a monthly benefit equivalent to 75 per cent of your pre-disability income, capped at a set amount (the benefit amount). However, Policy B simply stipulates an agreed benefit amount not linked or based on your pre-disability income. It also provides that any amount that you are paid will be offset if you receive other income – for example, from Centrelink, WorkCover or your employer. See – big differences! If you need help reading the fine print, Littles can help.
Unfortunately, it can take some time before you’ll see money from your insurer drop into your bank account. Not only do most policies have a wait period, but payments will not usually start until your insurer assesses and accepts the claim. Wait periods can be anywhere from 14-90 days depending on your policy. You may be able to rely on sick leave, long service leave or annual leave from your or employer, or claim Centrelink entitlements which you wait.
Having problems with your insurer? Read here.
The period over which benefits are paid is called the benefit period and (sorry to be a broken record) will differ from policy to policy. Depending on what yours says, the benefit period usually runs between two and five years, until you reach a certain age (typically 65 or 70). It’s important to note that some insurers will continue to pay partial benefits after you have returned to work if you do so in a reduced role and/or at a reduced rate of pay. This will generally ‘top up’ your income to bridge the gap between what you were earning before your illness or injury.
If you return to work doing all pre-disability duties, for the same pay and without restrictions, your payments will usually stop.
As noted above, most policies allow for payments of up to 75 per cent of pre-disability income capped at a certain amount. Say you have more than one income protection policy and the payments under Policy A are less than per cent of your pre-disability income, you might be able to claim on Policy B to take you up to the 75 per cent payment limit. Some of us have both income protection or salary continuance insurance, as well as TPD insurance. If this is the case, you may be able to claim on both at the same time. If you’ve got both policies and are finding it hard to work out what’s what, get in touch with Littles for a free super claims check. We are insurance experts and can help you get what you’re entitled to.
A workplace illness or injury can cause significant distress. In this situation, you deserve to have all your rights and options laid out for you. Each state and territory has a different approach to workers’ compensation, which impacts how different income protection policies interact with these various schemes. If your insurer has reduced your income protection benefits, or refused your claim, after you received compensation from a workers’ compensation scheme now or in the past, Littles may be able to help!
If you have an illness or injury that prevents you from working, you might be worrying about how you are going to pay your bills and put food on the table. Get in touch with Littles for a free super claims check. We can help you understand what you’re entitled to. Know where you stand, and get peace of mind.