Income Protection insurance is a type of insurance cover that many doctors have to protect their income from illness or injury. The product is commonly offered by Life Insurers and is designed to replace part of your income whilst you are unable to work based on illness or injury. Many doctors regard their future income as one of their most valuable assets and choose to use this category of insurance for protection.
Unfortunately, nobody knows when an accident or illness may strike. It is a little known fact that most insurance claims are for illnesses and these are not covered by Workers’ Compensation or other social security payments. People insure their cars, home and contents, yet maintaining all of these material possessions is reliant on our ongoing ability to earn an income. If you are sick or injured, and are an employee, then you may have some sick leave. Otherwise you may be able to draw on cash reserves for a short period of time. But consider the financial consequences of longer term incapacitation of, say, 3 months or longer.
How does Income Protection insurance work?
Income Protection insurance is designed to substitute the insured person’s normal income (commonly up to 75% of their normal income for policies first issued prior to October 2021 and 60-70% of income for new policies thereafter) with monthly payments if you are unable to work as a result of illness or injury. The cover can be structured in a number of ways and the following options impact quite considerably on the premium cost:
- Waiting Period (or Excess Period) – The number of days you will need to wait from disablement before monthly replacement benefits become payable. Variables are 14, 30, 60 and 90 days or 6, 12 and 24 months, depending on your possible sick leave or maybe long service leave.
- Benefit Period – The maximum period of time a claim will be paid. Choices are normally 2 years, 5 years or through to age 65 or age 70.
- Claims Escalation (optional) – If a claim occurs, this will index the payments each year in line with the Consumer Price Index or a set percentage. Usually more applicable to Benefit Periods through to age 65.
The information provided contains general information and examples and does not take into account your personal objectives, financial situation or needs. It is important, before deciding whether to act on any of the topics. that you consult a financial adviser if you require financial advice that takes into account your personal circumstances. You should also review the Product Disclosure Statement (PDS) issued by each insurer before considering further. Note that the policy wording will differ from insurer to insure and loadings, exclusions and other limitations may apply by the insurer to each applicant on a case by case basis.
Life insurance and Financial Advice services are provided by Experien Insurance Services Pty Ltd (EIS) ABN 99 128 678 937 and Experien Financial Services Pty Ltd (EFS) ABN 32 631 346 757. EIS and EFS are a Corporate Authorised Representative (No. 320626 and No. 1274354) of Affinia Financial Advisers Limited ABN 13 085 335 397 AFSL No. 237857. See our website for our Financial Services Guide. Always read the Product Disclosure Statement issued by an Insurer before considering insurance
