What kind of questions should I ask my insurance adviser?
Before purchasing an income protection insurance plan it is important for you as the buyer to educate yourself. If you are taking the help of an insurance adviser or an insurance agent then you should find out what are the tax implications of taking standalone policies, income insurance superannuation policies or combined policies.
If you are opting for an insurance plan under your super fund then you should also enquire about the eligibility criteria for these plans along with the compensation eligibility criteria for these plans. In addition, you should ask your insurance advisor, what is the right cover limit for you and if you should opt for a basic plan with a limited cover amount or if you should opt for a premium plan with both a high cover amount and many additional benefits.
Buyers who are self-employed should also ask their insurance advisor if they should opt for an indemnity contract or if they should opt for an agreed value contract that offers guaranteed payments irrespective if the policy holder’s income reduces when he is filing the claim.
What sort of waiting period should I choose ?
Choosing the right waiting period is crucial mainly because during the waiting period you cannot file any claims. The waiting period that insurers offer to Australian buyers ranges from 30 days – 120 days and the price of the policy is generally lower if the waiting period is longer.
Before deciding if you should purchase a policy with a 30 days or 120 days waiting period, you should check your financial history, your current financial standings, your personal circumstances and your health. If you have debts, mortgages or outstanding bills and have bad health then it is always better to purchase a policy with either a short or reasonable waiting period.
If you have savings kept for a rainy day or if you have assets that you can quickly liquidate in case of emergencies then choosing a longer waiting period may be ideal for you. The right waiting period will give you enough time to understand your policy better without having you to fend for yourself in case of an emergency.
How do I know how much cover to take out?
The loans, mortgages and outstanding bills you have to repay or pay will determine how much cover to take out, since these financial commitments cannot be put off for until you feel better and can resume work.
These financial commitments have to be repaid immediately or else a fine will be imposed by the lender. In addition, your total household expenses for every month, the number of dependants in your house and your budget will determine how much cover you should take out. Taking out a higher cover is recommended for those individuals who have dependants, who want to maintain their existing lifestyle or want to make maximum use of income protection insurance plans.
Taking out a lower cover limit may be an ideal solution for those adults who want to enjoy some benefits of income insurance while paying a limited amount of money due to a tight budget. This being said, buyers should aim to get at least 50%-60% of their annual salary towards payouts and should also aim to get superannuation perks if applicable.
How to choose the best policy?
The best policy for you will be that particular insurance cover that will give you maximum compensation payment, maximum additional perks, peace of mind and a stress free life. The best policy for you should be flexible, should allow you to choose a waiting period, benefit period, term and other important conditions about your own policy.
Remember, a longer benefit period implies that you can use the benefits that are offered to you for a longer period of time when you are unable to earn a steady income. A shorter term may ensure lower premiums but will in turn also limit the time frame in which you are eligible to file a claim. Some of the perks that the best policies offer include a death benefit, inflation benefit, day one claim benefit, transplant surgery benefit and cosmetic surgery benefit.
While some policies offer some or all of these perks complimentary with good plans, other policies may require the buyer to purchase a few of these benefits separately. If you are a self-employed professional then the best policy for you will be the policy that offers an agreed value contract with maximum and guaranteed compensation payments once a month.
I don’t have dependents; do I need income protection insurance?
Most people will be surprised to know that people without any dependants tend to spend as much if not more as compared to small families. This is because, people without dependants tend to spend money freely and do not save for the future. If you want to maintain your lifestyle or if you do not want to make compromises when you are temporarily unemployed then you should opt for a good income insurance plan.
If you are amongst the few single adults who like to save and plan ahead for their future, then you need an income protection plan as well since by purchasing a good plan, you will get compensation payments and added perks that will allow you to continue saving money despite being ill, injured and being unable to work for a few months. It should be noted that unemployed spouses are also dependants.
Income insurers in Australia offer special plans for home makers these days and these plans allow the unemployed partner or spouse to get compensation payments when he or she is temporarily ill or injured. These plans, ensure that the lives of family members are not disrupted when the mother, father or other important member of the house is unable to complete daily household tasks. These policies pay a fixed compensation payment when a claim is filed and this compensation payment can be used to hire help for household tasks.