What is Income Protection insurance?
Sometimes life throws you curveballs that you simply can’t predict. Luckily though, you can prepare for accidents and illness with insurance for your income. But with so many different insurance options, it can be really difficult to get your head around what’s available to you. Or more importantly, which type of insurance is the best fit for your unique living situation. Let’s start with income protection Iisurance, or income cover as it’s often known.
If you were to have an accident or fall ill to the point where you weren't able to work, income protection insurance could help to provide you with a regular monthly income. If you have family or loved ones that rely on your income to get by day to day, income cover can offer you peace of mind that you’re prepared for anything that life throws your way.
But what exactly is income protection insurance? And how much do you need?
Here is what you need to know to find out whether income protection insurance is right for you.
Why do you need income protection insurance?
A common mistake is assuming that you don’t need income protection insurance because you’re covered by ACC if you have an accident. Although ACC will cover up to 80% of your income in certain cases, there are circumstances where they will not. For example, if you have an accident, ACC will not provide you cover for things like trauma, if you get sick, or disabilities from events like a stroke. This means it is really important that you’re covered from all possible risks of sudden income loss, instead of just relying on ACC.
The risks of not having income protection
There are several common risks that come with not having income protection insurance
- Debts
A lot of us possess debt in different shapes and forms, including one of the most common types, a mortgage. No matter how far along you are with your mortgage or debt, it may be difficult to meet commitments without a regular source of income. As a result, the cost may need to be passed on to your loved ones.
- Lifestyle
Whether you enjoy traveling, classic cars, or going to live music events; money often makes the world go around. Having income cover can be the difference between continuing to enjoy your hobbies or not if you couldn’t work.
- Family
If you’re one of the primary earners for your family, even a small reduction in income can create a big headache. So, if you suddenly lost your whole income due to an illness or accident this could cause a big change to your family’s way of life. Income protection means that way of life is protected as well as your source of income.
To find out other great reasons to have income protection insurance it’s always good to talk to an Insurance Adviser.
How is income protection different from life Insurance and trauma cover?
Finding out which insurance cover is best for your circumstances can often seem a little confusing. However, having a variety of insurance options available is important because everyone’s life is unique. Learning about each of the types of cover will help you to navigate what’s out there allowing you to make an educated choice. Sometimes income cover, trauma cover, and life insurance are thrown into a similar basket. Let’s look into what separates them.
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Income Protection
As we’ve touched on already, income protection provides a regular payout to cover your loss of income if you were unable to work due to a disability from an injury or illness. Of course, there are more details and information to consider which we’ll cover below.
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Life insurance
It would be hard enough on your family if you were to be diagnosed terminally ill or pass away. So, you’re most likely not wanting to pass on any financial burden as well. Chubb Life's life insurance will pay out a life cover lump sum if you were to pass away, or life income cover if you were to be diagnosed with a terminal illness.
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Trauma cover
Sometimes called critical illness insurance, trauma cover will pay you out a lump sum if you are diagnosed with one of your policy’s defined illnesses or conditions for the first time. For example, if you had a serious head injury or stroke, trauma cover could provide you with money to help you with medical costs and to plan your future.
What is covered by income protection insurance?
There are many benefits covered by Income Protection Insurance. Some of which may seem like smaller details that you wouldn’t normally think about, but they’d make a big difference if you needed to claim. Chubb Life has a range of cover options, we’d recommend talking to an adviser to understand which ones are best suited for your circumstances.
A quick tip; a waiting period is the time from when your illness starts or accident happens, until the date at which your income cover benefits start. This will be agreed upon when you take out the policy.
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Total disability benefit
If you become disabled as a result of an illness or injury, you’ll be able to receive a monthly income. This would compensate for any income lost as a result of your disability to help you meet your financial commitments. Payments would start at the end of the waiting period.
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Partial disability benefit
This benefit is to make sure you don’t suffer financially as you ease back into full-time work. If you’re totally or partially disabled during your waiting period and can only earn less than 75 percent of your normal income when you return to work.
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Bed confinement benefit
If you are hospitalised or bed-stricken for more than 3 nights in a row, this benefit will pay one-thirtieth of the monthly sum insured for each night of your bed confinement. This is until the end of your waiting period or until you’re no longer confined to a bed, whichever comes first.
Vocational Retraining and Rehabilitation Benefit If you’re claiming for a total or partial disability and require retraining or rehabilitation to help you get back to your pre-disability function or to re-enter the workforce, this benefit will pay whichever is less out of your retraining, rehabilitation, or 24 times the monthly sum required. -
Recovery support benefit
Once again, this benefit is for if you're claiming for total or partial rehabilitation. If you need specialised equipment to help with your disability like a wheelchair or modifications to your car, this benefit will reimburse you the cost for the lesser of the equipment or 6 times the monthly sum you’re insured for.
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Return to work benefit
If you return to work after being on a Total Disability benefit for more than 12 months in a row or you’ve been paid a Vocational retraining and rehabilitation benefit, the Return to work Benefit will pay you an extra payment after three months and six months of continuous employment.
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Child care assistance benefit
If you’re a parent who is recovering from an accident or illness, you often have extra costs to do with childcare. If you’re on a total disability benefit and need help with looking after kids that are under the age of 14, this child care Aassistance benefit will reimburse you for the lesser of the extra childcare cost options or $800 for each child per month.
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Emergency transportation benefit
If you’re on claim for a total disability or partial disability and a medical practitioner signs off that you need emergency transport, this benefit will pay the lesser of the cost of the emergency transport or three times the monthly sum insured.
These are just some of the many benefits of income protection insurance with Chubb Life. Ask your Insurance Adviser about all the potential cover benefits or learn more about income protection insurance and find out which benefits would also help you with your recovery should you need to claim.
When to get income protection insurance?
The sooner you consider getting income protection insurance the better; you just don’t know what the future holds. In saying that, it is good to review your current insurance protection at moments of big change in your life. Let’s look at some examples of when it’s good to consider taking out income protection insurance if you don’t already have it.
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When you start a new job.
This is the most common time people take out Income Protection Insurance. Starting a new job is a handy time to take out a new policy as it ensures everything is up to date with your new income.
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When your family grows
As you have more children, your financial responsibility grows as well. Whether you’re a single or dual income household, it can be really difficult to get by when one of you suddenly stops earning. Having a baby is a great time to reassess what you’re insured for.
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When you buy a house
As well as a mortgage, there are a lot of costs that come with owning a house. When you sign on to buy a new property is a great time to make sure you’re covered should anything unexpected happen. If you’re taking out a mortgage, it’s also a good idea to look into getting mortgage repayment cover.
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When you review your finances
Setting up a budget helps to ensure that you meet all of your financial commitments. When it does come time to review your finances, it’s also a good time to look at how you can include income protection insurance. Your budget will probably also highlight how many payments rely on your income.
See our blog on when to review your insurance policies for more tips.
How to get income protection insurance
Income Cover is important to have if people rely on your income to live day to day. Thankfully, there are several ways to inquire about it. You might know more about what Income Protection Insurance is now, but it can still be a little confusing. To have peace of mind that you’re picking the best cover for you, it’s a good idea to seek further advice. We recommend talking with an Insurance Adviser or an Independent Financial Adviser.
These experts can offer help with all aspects of income protection insurance. They help by:
- Translating the legal jargon.
- Assessing your insurance needs.
- Offering you a variety of options.
- Recommending the best policy for your unique situation.
If you’re considering income protection insurance, Chubb Life is here to help. For more information or to take out cover, feel free to talk to an Insurance Adviser.
Find the right cover for you
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