Have you ever wondered what will happen to you and your family if you suffer from loss of income due to situations beyond your control? Have you ever feared that you may not be able to earn a steady income for 2 weeks or more due to injury, illness or other serious health conditions? If the answer to these questions is yes, then continue reading as the following paragraphs will help you understand why opt for income insurance and the important benefits of income protection insurance in Australia.
The purpose of income covers
- As the name suggests, income covers have one main purpose that is to protect the policy holder’s income. Income covers are considered as the most important form of personal insurance for people with children, elderly parents or unemployed spouses since this type of insurance plan ensures that families in Australia have enough money to run their household when the main breadwinner of the family is injured, ill and cannot work for a few months.
- The benefits provided with income covers will depend on the occupation of the policy holder, his health, his age, gender and his budget. While some insurers offer cheap contracts with a reasonable amount of benefits; other insurers offer cheap contracts with only basic benefits. Due to this reason buyers are always urged to educate themselves, do research, compare quotes, compare insurers and understand which contract is ideal for them. Income insurance plans have tax implications which include tax benefits however; the amount of cover along with the type of cover purchased will determine which tax benefits policy holders can enjoy.
- Income covers can either be purchased separately or combined with add on plans. Some of the additional plans that are usually offered to interested buyers include but are not limited to trauma insurance plan or critical illness plans and total permanent disability plans.
- Income covers fall under the personal insurance bracket and also fall under the life insurance bracket. It should be noted that term life insurance is not the same as income insurance since term life insurance protects families when the policy holder passes away whereas; income cover plans protect both the policy holder and his dependants while the policy holder is alive.
Benefits you can expect with cheap contracts
- Cheap contracts provide a limited compensation payment that can range from 20-50% of your annual pre-tax income. Cheap contracts may or may not offer a few additional perks.
- Cheap contracts do not offer a day one claim benefit. This means that, this benefit will have to be purchased separately if the insurer provides this option.
- Cheaper contracts may have a short benefit period, long waiting period and by default an indemnity contract.
Benefits you can expect with premium contracts
- Premium contracts offer maximum compensation payments that can range from 40-75% of your annual pre-tax income. Premium contracts will provide many additional perks such as an accommodation benefit, rehabilitation expenses benefit, cosmetic surgery benefit, transplant surgery benefit and a day one claim benefit. A death benefit may also be offered to the buyer. A choice between an indemnity and agreed value will most likely be offered by the insurer.
- For some professionals such as doctors, nurses, lab technicians and other medical professionals, speciality contracts such as the needle stick cover and HIV cover are offered. These contracts provide compensation payments and additional perks if the policy holder is infected at work due to a blood borne disease.
- The benefits for white collar employees and blue collar employees may vary slightly. In addition, self-employed individuals can expect different benefits as well. The basic bracket of compensation payment received will remain the same that is up to 75% of the policy holder’s re-tax yearly income however; the other benefits provided may change a little bit.
- It should be noted that both cheap and premium contracts do not offer financial protection to policy holders against loss of job due to the recession or other reasons. Before purchasing a policy, buyers must make it a point to find out from the selected insurer, if loss of job is covered for health issues.
- When a buyer purchases a good contract that offers basic, comprehensive and other benefits the buyer will have peace of mind since the purchased contract will protect his family when there is a situation due to which he cannot work.
- The payments given to the policy holder can, not only be used to pay school fees, college fees for children but can also be used to pay monthly bills, repay mortgages and repay loans. The policy holder has the right to use the payments as per his requirements.
Get the best plan you can afford
- While it is not necessary that the best plan is the most expensive one, it is important to note that the best plan is not necessarily the cheapest one either. Before purchasing a plan buyers should understand the terms of the contract and the benefits offered along with the limitations of the contract.The income protection insurance plans that are offered for cheap prices tend to have limitations such as limited compensation payments every month when a claim is filed and just a few complimentary perks. However, it is important to note that cheap plans also have their purpose, they allow people to purchase plans in their budget without putting financial strain on them. This being said, people with dependants must make it a point to purchase the best plan in their budget since plans with limitations often provide a false sense of security that can cause severe financial problems later on.
- Cheaper plans may also have certain terms that are unacceptable to some people, for instance cheaper plans may allow the policy holder to get compensation payments only if he is unable to fulfil all his duties at work and these plans may not allow the policy holder to get compensation payments if he is medically fit to fulfil one or more duties. Cheaper plans may also include exceptions along with premium loading fees.