Income Protection Insurance

income protection insuranceIncome protection insurance (IPI) is a form of protection insurance that provides a fixed monthly payment (usually around 75% of total income) if the policy holder is unable to work due to illness or injury. The length of  payments are determined by each individual policy, the most common policy lengths are: two years, five years, up to the age of 60 and up to the age of 65.

Income protection insurance is most popular among young and single people as they do not have to worry about any dependants in the event of their death. For those who are the sole breadwinner in a relationship, or have dependants then a joint income protection and life insurance plan may be a better option.

How Much Does Income Protection Insurance Cost?

The average premium for IPI is approximately 2% of an individuals total income, but this varies based upon a number of different risk factors such as:

  • Age
  • Gender
  • Smoker/non-smoker
  • Health (and pre-existing conditions)
  • Lifestyle
  • Occupation
For example somebody who is a smoker will have higher premiums than a non-smoker due to the inherit health risks. Occupations that have high injury rates (such as nurses and construction workers) will also have higher premiums. Policy specifics such as: waiting period (anywhere from 14 days to two years) and benefit period (anywhere from two years to up until the age of 65) can also play a part in the cost of IPI.

Income Protection Insurance Comparison

If you’d like to compare income protection insurance then simply enter your details at the top of this page and we will do the legwork for you, finding you the best quote for your specific situation.

Income Protection Insurance Contract Types

There are two main types of IPI: agreed value and indemnity.
  • Agreed Value,  the monthly payment is agreed upon at the start of the policy and is not affected by income fluctuations.
  • Indemnity, is usually a fixed percentage of income when a claim is made.
Agreed value is the less common contract type of the two and is also more expensive. Of course there are upsides and downsides to both policy types, if you have a reliable and stable income stream then an indemnity contract will most likely be your best bet due to the lower premiums. If you are self employed, planning on going on maternity leave or occasionally work part time only then an agreed value contract is more likely to be a better fit due to the fixed income nature.

How Much Cover Do You Need?

Income protection insurance is meant to be an income replacement so the policyholder needs to ensure that enough money is coming in to not only maintain his or herself but also any dependants (such as a spouse or children).  In most cases it’s wise to ensure that enough money is coming in so that mortgage and other debt requirements can be meet along with typical monthly expenses such as food, electricity, water and entertainment. By making sure there is enough cover the policy holder is free to focus their attentions on recovering from the sickness/injury which triggered the IPI policy into affect in the first place. As always the amount of cover needed is dependent on each individuals unique situation.

What Income Is Insurable?

Salary before tax as well as fringe benefits, bonuses and superannuation. This can vary from policy to policy so as always it’s important to read the fine print.

Claim Eligibility

To make a claim three major categories must be fulfilled:

  • Not working due to sickness/injury
  • Visiting a doctor for that sickness/injury
  • Be unable to perform at least one important work duty
Once these categories are fulfilled a claim can be lodged, the time between lodging a claim and receiving the first payment will differ from policy to policy.

Questions To Ask When Seeking Income Protection Insurance

Before signing up for an IPI policy, it’s important to shop around to make sure you are getting the best deal. It’s also recommended to ask a few key questions to make sure you fully understand the policy you are signing up for. We’ve listed some questions that we think everybody should ask, but if there is something you don’t understand about a specific policy – it’s always better to ask before signing.

  • What’s covered?
  • What’s not covered?
  • How much are the premiums? Will they increase over time? If yes, how is this increase determined?
  • How long will there be between lodging a claim and receiving the first payment?
  • How much will I receive if a claim is accepted?
  • How long will payments last?

Income Protection Insurance Testimonial

 

 

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