Income protection plans serve two important purposes; these plans ensure that the insured person does not have to worry about income loss when he suffers from an injury or illness and these plans ensure the financial stability of families in Australia. Income insurance plans offer monthly compensation payments when the professional files a claim that is accepted by the insurer.
These plans ensure that people have money to pay household bills, outstanding bills, repay loans, repay mortgages and have some money for other personal purposes as well. Depending on which additional benefit the insured person opts for, he or she may be able to fight inflation, file a claim before the waiting period of the contract is over or may get rehabilitation expenses from the insurer.
Income protection covers are a must for lawyers since these covers can ensure that lawyers do not have to worry about financial commitments such as loans or bills when he is ill or injured and he can get back to normal as soon as possible.
Such plans ensure that the family of the policy holder does not have to worry about how to make ends meet or does not have to compromise on their basic needs when the policy holder is temporarily unemployed.
To be eligible to purchase an income cover for lawyers, the buyer has to be actively practicing the said profession at the time of purchasing the cover. Certain legal professionals such as barristers have to be practicing for a minimum of 2 years in order to get guaranteed compensation payments from the insurer.
The buyer has to be an Australian resident who meets some basic eligibility criteria of the selected insurer, for instance some insurers may require the buyer to earn a minimum of $100,000 annually to get guaranteed compensation payments.
Claim related eligibility criteria include filing a claims form that is supported with documents such as income proof in the case of indemnity contracts.
For agreed value contracts, the buyer has to file the proof of documents with the insurer while purchasing the contract from the insurer or at the time his application is accepted by the insurer.
Most insurers offer a maximum of 75% of the policy holder’s annual pre-tax income towards compensation payments given on a monthly basis however; it isn’t unheard of, that a few selected insurers offer additional compensation payments that can total up to 80-90% of the policy holder’s annual income.
These few selected insurers charge a premium rate for their policies due to the outstanding benefits offered. These few selected insurers may offer an additional 8-9% compensation every year towards superannuation benefits provided the employee is offered these benefits by his employer.
The insured amount is tax deductible which implies that the policy holder is eligible to get tax concessions or tax benefits if he meets a few requirements. One of these requirements is that, the income cover should either be a standalone plan or should be purchased under a superfund.
Self-employed lawyers are offered similar benefits however; if self employed lawyers opt for business expenses insurance then they can expect guaranteed compensation payments for fixed expenses when they file a successful claim.
Benefits of Income Protection
- Business expenses benefit is meant for self employed lawyers who want to ensure that their business runs smoothly even when they are on leave due to health reasons. This type of cover offers compensation payouts when a claim is filed for fixed business expenses such as electricity, rent, wages of some staff and certain other expenses.
- Agreed value contracts are ideal for those lawyers who earn a fluctuating level of income every year and for those legal professionals who want a guaranteed payout every month irrespective of how much they earn at the time of filing a claim. These contracts ensure that the insured person gets a pre-decided payout every month and this payout depends on the amount the policy holder earns when he purchases the contract. Indemnity contracts on the other hand, do not offer this benefit which implies that if the policy holder’s income dips at the time of filing the claim then he will receive a lower monthly compensation payment.
- The benefit period of the contract ensures that the policy holder can enjoy the given benefits for those many years or until he is 60 – 65 years whichever is earlier. Benefit periods of 1 year or 2 years tend to be easier on the pocket on a short term basis however; benefit periods of 5 years or more tend to provide financially stability to buyers who need long term benefits.
- Additional benefits are offered to each and every buyer however; the number and type of benefits offered with depend on the amount of the policy and the type of the contract. Some of the paid and free benefits that can be expected with income covers for lawyers and other legal professionals include day one claim benefit, 24 hours worldwide cover, rehabilitation expenses benefit, accommodation benefit, death benefit, cosmetic surgery benefit, indexation benefit, guaranteed renewability benefit and transplant surgery benefit. Guaranteed compensation payouts may be offered by some insurers to certain professionals such as barristers and legal aids of certain professionals.
What to Remember
- The benefits offered by income covers are meant to help the policy holder recover in peace without having to worry about bills and other financial liabilities. These plans are a must for those policy holders who have less or no savings or have dependants that rely on the policy holder for basic needs. Compensations payments will be given to the policy holder if he files a claim that meets all requirements such as claims for temporary illness or disability will most likely be accepted.
- Loss of income due to reasons such as criminal offences at work, malpractice or total and permanent disabilities are usually not accepted. Most insurers do not offer compensation payment for loss of jobs, which implies that income covers only offer payouts for temporary health problems.
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