Income Protection Insurance provides you with a monthly payment while you are unable to produce an income as a result of illness or injury.  

Many policies will cover up to 75% of most people's income if you are totally or partially disabled.  

By providing regular payments, Income Protection Insurance can assist you and your family to function at a level of financial normality.  It gives you the financial security to focus on your recovery or treatment, without worrying about regular expenses.  Income Protection policies are very flexible and can be tailored to suit your individual circumstances.

Premiums for Income Protection are generally tax deductible however tax is payable on benefit payments. Your financial adviser will be able to help you determine the appropriate level of cover to insure your income. 

Definition of Disablement

There are generally two types of Disablement, total and partial.

Total Disability benefit

There are a few definitions in the market of total disability.  Which one works most appropriately for you should be discussed with your Financial Adviser.  The definitions generally are:

‘Hours based’ policies – these policies pay benefits if you are unable to perform your regular duties, but will still allow you to work up to 10 hours per week without off set of this income earned.

‘Duties based’ policies – these policies pay benefits if you are unable to perform one or more of your regular duties.

‘Loss of income based’ policies – these policies pay benefits if you suffer a loss of income as a direct result of your illness or injury.

Partial Disability benefit

Definitions of partial disability vary greatly between insurance providers.  Some require you to be totally disabled for 7 or 14 days, whereas some do not have any restriction at all.  To be eligible to claim a partial benefit, you are required to be disabled in some way that affects your ability to work at full capacity.

Agreed value vs indemnity

You can apply for an ‘Agreed Value’ contract or an ‘Indemnity Value’ contract. 

Agreed Value 

An agreed value contract commonly means that the monthly payment you apply for will be the amount paid at claim time.  In most cases, you are required to supply financial evidence up-front to the insurance company.  Once endorsed by the insurer, they agree to pay the insured amount even if your income drops in future years.

Indemnity Value

An indemnity contract means the monthly payment will be assessed at claim time and is generally based on your average income over the previous twelve months, prior to claim.  It is therefore very important to make sure you are insuring for the correct amount of cover.  If your income level drops in the future, the insurer may reduce the benefit payable.

Other Information

Waiting periods

The ‘waiting period’ is the period of time required for you to be unable to work, before your benefit is payable. You can generally choose waiting periods of 14, 30, 60, 90, 180, 365 days or two years.  A shorter waiting period usually means a higher premium. 

Benefit periods

The benefit period is the period during which you receive your income protection payments. You can generally choose between a two or five year benefit period or up to age 55, 60 or 65. 

Included and optional extras

Most Income Protection policies also incorporate a series of benefits which are provided at no extra charge, as well as a variety of optional benefits for an additional cost. Included benefits may be:

• a recurring disability benefit
• an elective surgery benefit
• a specific injury benefit
• a death benefit.

• an accommodation benefit
• a bed confinement benefit
• a crisis benefit
• a family assist benefit.

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