It’s natural to wonder — if you suffered a sudden sickness or injury, what kind of safety net would protect you and your family financially while you were unable to work? Income protection insurance is one product that can serve such a purpose.
These policies can cover most of your salary during your recuperation period, preventing a physically or psychologically devastating incident from also having dire financial consequences. With that said, insurers may prove unwilling to pay a claim, or pay less than full value, which increases the importance of having an expert lawyer in your corner should you ever need these funds.
By learning about this type of insurance, as well as the process of making a claim and finding a reliable solicitor, you can build confidence and make sure you are covered adequately. With the right insurance and the best lawyer on call in case you have to make a claim, your income can be safeguarded against unfortunate twists of fate.
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Income protection insurance is a type of policy issued by private insurers, often offered as part of a superannuation fund. It is considered a type of life insurance. These policies are available in several amounts of coverage, and your ability to receive a policy will be affected by several factors, including your income and medical history.
The purpose of income insurance is to provide up to 85% of your salary while you are too ill or injured to work and thus unable to earn your pay as usual. If a claim is accepted, a policy can continue to provide payment for 2 years, 5 years or up to age 65 depending on the policy terms. It is meant to stay in effect for a specified period of time, unlike total permanent disability policies. The latter are generally designed to provide one-off lump sum payouts for people too seriously hurt or sick to work at their full capacity ever again.
When you are injured or sick and unable to complete your duties, it is time to make a claim.
The first thing you have to do when you make a claim is to make sure the injury or illness you are suffering from is included in the terms of your coverage. Policies can be long and complicated, but they do contain important information to know.
For instance, there are some preexisting conditions that cannot be the basis of a claim, and insurers can state that they do not cover deliberate acts. Understanding the exact nature of what your policy covers is important in case the insurer disputes the claim, in which case a lawyer can help you prevail in receiving the payments.
Some of the details regarding your income protection insurance policy determine how large a claim you can make later if circumstances render you unable to work, assuming you can make the insurer honour your claim. For example, there is a difference between indemnity value policies and agreed value policies.
Indemnity value policies let you recoup a percentage of your salary when you make the claim. If you have a stable source of income, it will be easy to predict what such a policy is worth it. If your income has decreased since buying the insurance, however, the possible amount you can claim will also decrease.
With agreed value policies, you set how much the insurance is worth when making the purchase. After that, the value stays constant and it will pay out the same monthly amount. If your income tends to fluctuate from one year to the next, this can be a more reliable type of income protection insurance, though the policies do tend to be more expensive.
The overall value of any income protection insurance policy often won’t exceed 85% of your pre-tax salary. The actual number will be set by the policy itself and tends to rise to approximately 75%. The policy may also have a hard maximum that it will pay out. These typically top out around $250,000.
Income protection insurance claims are not paid out in lump sums, no matter the type of sickness or injury you suffer unless there is a back payment being claimed. Instead, most policies pay out in monthly instalments over a term specified in the policy itself. A long benefit period may total five years, while a shorter one could be closer to two. Some income policies are not tied to how long they will pay, but rather to what age — for instance, they may keep up monthly payments through age 65 or 70. Insurers may attempt to prevent you from receiving that maximum value, which may require a legal case to resolve. A solicitor on your side will be essential in resolving this situation.
Policies that have longer terms and higher maximums tend to be more expensive. When picking your insurance, you will have to balance the potential benefits with the costs and make a pick that will grant you adequate protection in case something goes wrong.
Most life insurance products sold in Australia — 70% — come through super funds, and these typically offer general life coverage alongside total permanent disability and income protection. By contacting your super fund, you can determine whether you have a default income protection insurance policy, which is a common feature.
There are some general differences that apply to insurance issued through your super and policies bought from, financial advisers and insurance companies. For example, buying outside of super may allow you to buy a higher coverage level or receive more added features, and the policies are typically tax-deductible. If you go through your super, on the other hand, the default offer will likely be the most affordable income protection coverage you can find.
The terms of the policy you’re offered will depend on personal details. It’s essential that you be honest in answering questions about your health and employment, as a later discovery that you were untruthful could result in a claim being denied when you need it most. You’ll have to tell your insurer or super fund where you work, how old you are, what you earn and whether you have any pre-existing medical conditions. You’ll also need to disclose dangerous habits or hobbies, from smoking to skydiving and beyond.
There is a waiting period when you first receive a policy, which means you cannot make a claim during this initial span of time. In the case of more affordable policies, the period can be as long as two years or more. The shortest time frame is generally around two weeks. Other choices include whether you want to pay stepped or level premiums. Stepped premiums are recalculated over time and may go up as you age. Level premiums start higher but increase much more slowly.
To maximise your chances of receiving a fair and speedy payment on your insurance claim, you should have legal representation. Having an expert in your corner gives you access to advice about what you are truly owed, whether the insurance company’s offer is fair and whether your claim has a chance of being honoured.
There are a great deal of policies and procedures involved with insurance claims. These can slow down the process of you receiving payments. With that said, when you are in pain and unable to work, you need the money as quickly as possible. Having a solicitor on your side can help you make your voice heard if the insurer is being too slow to pay or unfairly rejects your claim.
Contact us for no-obligation legal advice about your claim.
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