Importance of Income Protection Policies
Accountants have a very important job; they keep track of salaries, expenses and other financial matters of companies and individuals who need the financial expertise of a professional.
Due to this accountants can suffer from both physical problems and emotional problems. It is a common fact that stress and being over worked can cause a range of mental problems such as depression and anxiety along with physical problems such as aches, pains and mild fever. Both employed and self-employed accountants need to purchase income insurance plans if they have dependants that rely on their income or if they do not have a savings fund that they can dip into for emergencies.
Income protection for accountants can ensure that these hard work professionals have enough time to get back on their feet without worrying about financial issues that may arise due to temporary loss of income.
Certified accountants who practice the said profession at the time of application are eligible to purchase income covers online or via the phone. Permanent Australian residents and citizens are eligible to purchase income covers.
Members of super funds are eligible to purchase income covers under super funds provided that they meet the criteria of the selected super fund, to get more information about this type of insurance plan and its eligibility criteria, the buyer should contact the manager of the fund. Since different insurers have varying terms for the minimum number of hours the professional should work every week, buyers should check the selected insurer’s website for these details.
It is important to note that if the professional’s job status changes while the policy is active or if the professional gets a promotion then he should inform the insurer right away. Failure to keep the insurer apprised of the current job status can result in rejected claims and a lapsed policy. Claim related eligibility criteria include, a completed claims form along with supported documents such as income proof, disability or illness proof and other documents if required by the insurer.
Indemnity contracts require the policy holder to provide the income proof documents at the time of application whereas agreed value contracts require the policy holder to provide the income proof documents at the time of filing the claim.
The maximum compensation amount that is given by insurers in Australia is 75% of the policy holder’s pre-tax income however; some insurers may also offer an additional 8-9% towards superannuation perks provided that the policy holder’s employer offers this salary perk. As far as possible, accountants are advised to opt for the highest cover they can afford for two reasons.
A higher cover amount will ensure a higher compensation amount and a higher compensation amount will provide some peace of mind to the policy holder which will be beneficial for his health.
Benefits of Income Protection
- Accountants who opt for good policies may get income protection benefits such as but not limited to compensation for illness, compensation for injury, compensation for certain mental illness, compensation for death, a day one claim benefit, rehabilitation expenses benefit and accommodation benefits. The day one claim benefit is recommended for those buyers who have frail health or have financial commitments that they cannot avoid. This benefit is useful if the policy holder has to file a claim during the waiting period of the policy. Buyers who opt for a good plan can also expect to receive a contract with flexible terms, an adjustable waiting period, an adjustable benefit period and a longer term.
- Buyers who opt for indemnity contracts can expect to receive a contract that will pay a variable amount to them along with a few benefits at the time of filing a successful claim. The payouts for indemnity contracts depend solely on the amount the insured person earns at the time of filing the claim. These contracts are not recommended for people who are self-employed or for those employed individuals who earn fluctuating amounts of income every year.
- Accountants who are interested in getting the best income insurance plan can opt for the inflation benefit and the day one claim benefit. The inflation benefit ensures that the policy holder’s cover limit increases with inflation which ensures that the policy holder is well protected at all times. The inflation rate is calculated according to the CPI index.
What to Remember
- The waiting period and benefit period must be chosen carefully for various reasons. The waiting period ranges from 2 weeks – 2 years however; most policies offer waiting periods ranges from 30 days – 120 days. The benefit period usually ranges from 2 years – 5 years and buyers can choose how many years they want to enjoy the benefits for. The term of the plan can range from 10 years – 20 years or more.
- Buyers also have an option to choose between two types of premium payment plans.
- The first premium payment plan is known as the stepped premium plan and is beneficial for those buyers who want to take short term contracts while paying low premiums at first. This premium payment plan requires the policy holder to pay increasing premiums as he or she grows older.
- The second type of premium payment plan is known as the levelled premium plan and is beneficial for those individuals who want to take long term contracts while paying steady premiums for the entire term of the policy.
- Superannuation plans have many benefits such as a shorter application period, shorter waiting period and longer benefit period. These plans may also offer additional benefits for the policy holder however; super funds have their own set of rules and regulations for both application and claim compensation payments. The taxation laws for super funds are also different than regular plans; which may mean that the policy holder has to pay additional tax if he gets compensation payments from the insurer through the super fund.