Back to basics: what is income protection?

Income protection insurance is a type of insurance policy that helps to protect your income if you are unable to work due to illness or injury. It is designed to provide you with a replacement income until you are able to return to work or until you reach a certain age, depending on the terms of your policy. 

In Australia, income protection insurance is often referred to as “salary continuance” or “total disability” insurance. It is typically offered as an optional benefit through a defauly membership of a superannuation fund like REST or AustraliaSuper, provided through your employer, or it can also be purchased independently through a financial advisor or insurance broker. 

How does income protection work?

There are two main types of income protection insurance in Australia: “agreed value” and “indemnity value”. Agreed value policies pay out a fixed amount of money based on the income you were earning at the time you took out the policy. Indemnity value policies pay out a percentage of your income at the time you claim, up to a maximum amount specified in the policy. 

What is a waiting period?

Income protection insurance policies generally have a waiting period, which is the amount of time you must be unable to work before you can make a claim. The waiting period can range from 14 days to two years, and the shorter the waiting period, the higher the premium. It is important to choose a waiting period that is appropriate for your financial situation and the length of time you would be able to survive without an income. 

In addition to the waiting period, income protection insurance policies also have a benefit period, which is the length of time that the policy will pay out. The benefit period can range from two years to age 65, and again, the longer the benefit period, the higher the premium. 

Should I get income protection if I don’t have it?

When considering an income protection insurance policy, it is important to carefully review the terms and conditions, including the exclusions and limitations. Some policies may not cover certain types of illness or injury, such as pre-existing conditions or self-inflicted injuries. It is also important to understand how the policy defines “total and permanent disablement”, as this will determine whether you are eligible to make a claim. 

Income protection insurance can be an important financial safety net for individuals and families, particularly for those who are self-employed or do not have access to sick leave or other forms of income protection through their employer. It can help to cover expenses such as mortgage payments, bills, and living expenses while you are unable to work. 

If you are considering income protection insurance in Australia, it is a good idea to shop around and compare policies from different insurers to find the one that best meets your needs and budget. It is also a good idea to speak with a financial advisor or insurance broker who can help you understand the different options and make an informed decision. 

Overall, income protection insurance can provide peace of mind and financial security in the event that you are unable to work due to illness or injury. It is an important consideration for anyone who relies on their income to support themselves and their loved ones. 

How do I make a claim for income protection?

Know your rights. 

If you have income protection and are yet to make a claim, you are entitled to legal representation and Littles can help you

If you have already lodged a claim and it has been rejected by a superannuation fund or insurer, you may be entitled to have the decision reviewed through an internal resolution procedure. 

If your complaint has been upheld, you may be able to litigate in a court or lodge a complaint with the Australian Financial Complaints Authority (AFCA). 

There are strict time limits to challenge an insurer’s decision, so it’s important you seek legal advice as soon as possible. 

What is the Littles difference?

Put simply, Littles are experts in superannuation and insurance law matters. 

Our insurance team has helped thousands of consumers claim their entitlements, and our Head of TPD and General Insurance has extensive industry knowledge and insight on how to maximise your prospects of success. 

We also speak your language, at sixteen languages and counting.  Forget paying for a translator or for a lawyer who doesn’t understand you and your cultural background. 

All our superannuation and insurance law matters are conducted on a no win, no fee basis, and we don’t charge you upfront for any disbursements necessary to prosecute your claim.  

If you would like superannuation and insurance law advice, reach out to Littles today by using our free Claim Checker

About the author

Littles’ Head of TPD and General Insurance, Rowan McDonald, is an expert in insurance and superannuation law.  Rowan is an experienced litigator and has prosecuted thousands of successful insurance claims for consumers. 

Having worked in the insurance industry for over fifteen years, Rowan has an extensive industry contact list and regularly presents to disability support groups, financial industry professionals and multicultural organisations. 

Rowan has also advised some of Australia’s top insurers, giving him unrivalled insight into the claim process from all perspectives.  Rowan takes a pragmatic and common-sense approach to the advice he provides his clients. 

For your free, personal consultation get in touch with Rowan today. 

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