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Life insurance policies offer a wide range of health services for the insured if they are injured or too sick to work. However, Australians can’t just opt into life insurance without taking a close look at the type of coverage they need, how they want to secure their policy, and whether they want income protection insurance. If you do want income protection, keep reading.
What Type of Life Insurance is Privately Offered?
The first step in comparing life insurance plans in Australia is deciding what type is right for you. However, only income protection insurance has a waiting and benefits period, which we’ll expand upon in the next section. For now, let’s examine what types of protections are offered to you:
- Life Insurance is for protecting your family’s future in case you die or are diagnosed with a terminal illness. Some policies will still grant you a lump sum if you survive.
- Total Permanent Disability Insurance is specifically for helping you live a better life if you are permanently disabled and can’t work regardless if you were injured on the job.
- Critical Illness Insurance can offer you and your family peace of mind if you’re diagnosed with cancer. Critical Illness will pay you a sum while you recover.
- Income Protection Insurance provides you with temporary living expenses if you become too sick or injured to work. This policy is further separated into periods.
Still, think Income Protection Insurance is the best option for you and your family? Read on.
Income Protection Insurance: Waiting Period vs. Benefit Period
Income Protection Insurance is the best coverage for any age group because it protects you from the unexpected while also giving you the benefit of cash-in on your premiums without the threat of death.
Many people under Income Protection Insurance recover fully, likely because this insurance removes any added income-related stress often attributed to the inability to work.
When taking out Income Protection Insurance, you will be asked to choose your Waiting Period and Benefits Period, both of which will affect your premiums and insurance length.
Under Income Protection Insurance, the Waiting Period is the amount of time the insured has to wait until their benefits kick in. Waiting Periods can be as low as 14 days and as high as 2 days, but there’s a catch.
You still need to be unable to work by the time your Waiting Period ends. Otherwise, you won’t get paid out. If you’re still sick, however, you start receiving payments.
Your first payment will arrive one month after the Waiting Period ends, and the length of the Benefit Period determines how long you’ll receive said payments.
If you purchase a long Waiting Period, make sure you’re covered during that time if you recover sooner than later. Calculate your average monthly costs and put that in a savings account incrementally.
The Benefits Period of Income Protection Insurance describes the amount of time you will receive benefit payouts as a part of your policy. Many insurance companies will offer longer Benefits Periods with longer Waiting Periods because grouping long with short would make the policy quite expensive. Either way, buying into a longer benefits period is typically better.
Most insurers will offer Benefits Periods that last from 1-year to 5-years. A shorter Benefits Period will leave you with lower premiums, but depending on how risky your job is, you may want to buy the full 5-year package. Employees who work in a more technical position may also prefer a longer period because it gives them more time to recover or adjust to a new lifestyle.