How Income Protection Works

Income protection insurance plans in Australia serve one main purpose that is to help families survive loss of income when policy holders cannot earn a steady income due to illness, injury or other serious health problems. Before purchasing an income cover it is important for buyers to understand how this type of protection plan works and what are the steps involved in filing a claim.

Three facts about purchasing income protection insurance

  • Income covers can be purchased online by simply visiting the website of an insurer or an insurance agent. To purchase a cover; buyers have to decide which policy they want and then purchase the policy online or via the phone. Purchasing a policy online is generally easier than purchasing it over the phone; provided the buyer remembers to follow a few simple steps like asking for quotes before purchasing the policy and getting insurance advice before committing to purchase a cover.
  • Before purchasing a policy, buyers are urged to compare policies by opting for the free yet helpful services of income comparison websites. These websites provide various easy to use facilities that can help buyers find a policy that meets their needs. For instance, these websites offer multiple insurance quotes for life insurance plans, income covers and other personal insurance. In addition, buyers can compare plans online by simply choosing a few plans and clicking on the compare button.
  • After purchasing a policy the buyer will have to wait for the insurer to approve the application. Depending on the terms and conditions of the selected cover, the buyer may or may not have to undergo medical tests or answer questionnaires. People who opt for cheaper policies may be asked to complete these formalities however; this will largely depend on the insurer.

Three facts about how income protection plans work

  • To be able to enjoy the benefits offered by the insurance cover, the buyer has to file a claim. This can only be done when the application is approved by the insurer, the premiums are paid on time and the waiting period is over. Until the default waiting period is over the policy holder cannot file a claim. The only exception is when the policy holder has opted for the day one claim benefit. With this benefit the policy holder can file a claim before the waiting period is over, and once the default waiting period is over the policy holder will promptly receive the claim amount from the insurer.
  • Buyers who opt for income covers are given the option to choose a contract with either basic or comprehensive benefits. While the buyer’s budget will decide which contract he opts for, at times the terms and conditions of the contract may also influence the type of contract the buyer will have to purchase. For instance buyers with no pre-existing health conditions may be offered cheaper contracts with many perks however; buyers with pre-existing health conditions may be offered cost effective contracts with exclusions.
  • There are two types of contracts offered to buyers and depending on the cost of the policy along with the rules of the contract; the buyer may be given a choice between an agreed value contract and an indemnity contract.

There are two differences between these two types of contracts.

  • The first difference is; agreed value contracts do not require the policy holder to submit proof of income before a claim is filed; whereas indemnity contracts require the policy holder to submit proof of income at the time of purchasing the policy.
  • The second difference is; agreed value contracts pay out a pre-decided amount to the policy holder once he has filed a successful claim; whereas indemnity contracts pay out a varying amount to the policy holder and this amount will be decided by taking the current salary of the policy holder in mind.

Three facts about filing an income protection insurance claim

  • While some income insurers in Australia allow policy holders to file claims online; generally policy holders are required by most insurers to file claims via the phone. While filing a claim via the phone, the policy holder will have to provide important claim related information. In addition, important claim related documents may also have to be scanned, faxed or snail mailed to the insurer. Policy holders with questions are given the option to contact either the insurance agent or insurer to get answers. Most insurers also provide claim related information directly on their websites and also provide answers to frequently asked questions that claimants may have.
  • The most common reason for rejected claims in Australia is not submitting adequate documents. The next most common reason for rejected claims in Australia is withholding information from the insurer. Other reasons for rejected claims include, claims being filed too early, claims being filed too late and improper completion of paperwork. Not cooperating with the insurance agent and claim frauds are other reasons for rejected claims.
  • Although most insurers strive to pay claims as soon as possible, there is a process in place that can take a few days to many weeks to be completed. While it can be frustrating to wait for the claims to be accepted, it is important to cooperate with the insurer so that the paperwork and other formalities can be completed on time. Policy holders should remember to inform the insurer of any life changing events as and when they happen since this can prevent a rejected claim. Loss of job, change of job, promotions or any other work related events should also be reported to the insurer. A change in marital status must also be reported to prevent the policy from lapsing. If you are diagnosed with any new conditions after purchasing the policy or if you are aware of any genetic or other conditions you may have before purchasing the policy then the insurer has the right to know this. Failure to do so will most likely result in a rejected claim.

 

 

 

 


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