Income protection plans are a must for both self employed farmers and farmers who work for an organization. These plans are not mandatory however; these plans are essential in preventing situations such as severe debt and bankruptcy.
Income covers that offer compensation for fixed costs to self employed farmers ensure that the professional has enough money to run his business while he is on sick leave or unpaid leave due to any other eligible reason.
Income covers that offer up to 75% of the applicant’s annual income towards compensation payments, ensure that the applicant has enough money to buy groceries, pay for school fees, take care of his elderly parents, pay outstanding bills and repay loans or mortgage payments.
Income covers that offer 1 or more additional benefits ensure that the farmer can get maximum benefits from the plan without having to worry about unforseen situations or unexpected surprises.
For instance, if a farmer opts for an income cover that has the indexation benefit then the policy holder can be sure that the cover limit of his policy will increase along with inflation. This benefit helps in combating inflation since the cover limit increases every year according to the CPI index.
- To be eligible to purchase income protection insurance plans for farmers, the applicant has to prove his income by providing proof of income with the application. Self employed farmers may find this tough especially if they have been affected by drought, floods or other natural disasters. To help farmers in Australia get income covers without facing eligibility problems, many insurers offer flexible terms on income covers and may also waive their minimum requirement to provide financial proof. However; since each insurer has different rules; the applicant must contact either the insurer or insurance agent directly to get these details or to be considered for this exemption.
- If you have not been exempted from providing proof of income then you should note that if you purchase an indemnity contract then you have to provide this proof at the time you file a claim. The amount you earn at the time you file the claim will determine the payouts you get from the insurer if your claim is accepted. Indemnity contracts offer variable payments given on a monthly basis once the insurer accepts the claim.
- If you purchase an agreed value contract then you have to provide the proof of income at the time of application or purchasing the contract. The amount you earn at the time of applying for the policy will be used to determine the payouts you get form the insurer if your claim is accepted. Agreed value contracts offer guaranteed monthly payments for a pre-decided amount once the insurer accepts the claim.
- The insured amount will be determined by the age, sex and job title of the buyer. Most insurers offer a maximum compensation of 75% of the policy holder’s annual income along with an additional benefit for superannuation employee benefits if offered by the professional’s employer. The maximum insured amount for self employed farmers can range from 75% – 100% of the fixed costs for running the business; however the price of the policy and the type of contract will determine the total compensation payouts that will be payable every month.
- A few insurers offer a unique benefit to policy holders who opt for good covers. Usually, the higher the cover limit, the higher the discount on premiums the buyer can enjoy.
Benefits of Income Protection
- The benefit period for farmers can be as less as 1 year to as much as 5 years. Alternately the given benefits can be enjoyed by the farmer until he reaches the age of 65 years. The shortest waiting period for income protection for farmers is usually 30 days however; many insurers do offer flexible terms to people who want day one claim benefits or want a shorter waiting period. Although the maximum permissible waiting period is 2 years; most insurers discourage buyers to opt for a waiting period more than 120 days. Waiting for an exceptionally long time such as 1 year to get the benefits can lower the cost of the policy; but taking this step will also prevent the farmer from getting benefits especially if there is an emergency and he needs them.
- The death benefit, transplant surgery benefit, cosmetic surgery benefit, accommodation benefit and rehabilitation expenses benefits are usually offered along with good plans for no additional cost. The guaranteed renewability benefit and the day one claim benefit are additional benefits that can be purchased online or via the phone from certain insurers.
What to Remember
- While it may be tempting to opt for the cheapest contract available; farmers must note that, cheap contracts are not necessarily the best and cheap contracts have limitations. Self employed farmers should consider getting an agreed value contract that has been tailor made to suit their needs. Farmers who are employees for organizations can opt for indemnity contract with flexible terms provided they earn a fixed amount of income that doesn’t fluctuate significantly every year.
- Although insurers in Australia, aim to pay 100% of all claims filed every year; this is not possible when; policy holders hide important information from the insurer or when policy holders forget to fill the claim application properly. To ensure that your claim is accepted in the first go, make it a point to disclose important information to the insurer when required. For instance, buyers with pre-existing health conditions or known genetic conditions should inform their insurer of these health problems; whereas policy holders should inform their insurer of any new problems they are diagnosed with. If the policy holder is diagnosed with a health condition that requires discretion or a genetic condition then the insurer will not disclose this information to other insurers unless absolutely necessary. Other information that should be disclosed to the insurer include promotions, loss of job, change of job title, starting a habit such as smoking and engaging in rough spots such as rugby.