According to Moneysmart.gov.au an income protection insurance policy can cover up to 85% of your wage in the case of an illness or injury.
According to Moneysmart.gov.au an income protection insurance policy can cover up to 85% of your wage in the case of an illness or injury. It is calculated from the 12 months before the time of the claim. It may sound like an easy policy to find, and pay for, but depending on the circumstances, you may find that you do not have the correct type of coverage. There are five distinct types of protection for your income that could come into play.
- Disability-This type of insurance would be used in the case of an accident or illness that prevents you from returning to your normal duties at work. It is usually paid monthly at an amount that is no more than sixty percent of your income in tax free payments. The premiums on these policies can run you between 1.5% and 3% of your monthly income. Many plans offered through your employment will give this option along with your medical insurance, but it is a base amount of coverage that you will find inadequate if something should ever happen to you.
- Long Term Disability-This type of coverage is used when your illness, or injury, keeps you from being able to work after the first three months. If you are unable to work after that amount of time this part of the policy will kick in. It will cover sixty to eighty percent of your income and may even cover the amount of income lost if you must take a lower paying job to continue working. Keep in mind that in some instances you may have to pay some of the amounts given to you back once you are able to do so. The cost ranges from 1% to 3% of your income and each specific policy will have a period that you have to wait before getting this payment. It is also a monthly payment sent to you tax free.
- Business Overhead-The coverage that you get from this policy will only cover the business owner in the case of an injury or illness. It pays a monthly amount based on your expenses. It covers your expenses only, not the amount of the profits that you could potentially lose. The benefit of this income protection policy is to allow you to keep your business operating until you are up and moving again. They are also tax free, and the premiums can be written off as an expense. The average cost throughout the nation is $1200 per year, but it can vary due to location and business specifics.
- Total Permanent Disability-This policy will kick in if your temporary disability becomes permanent. This means that if you are injured, or become ill, to the point of never being able to return to work, you will receive small payments monthly that are a portion of what you would have made if you were still working. The amounts can vary depending on your policy, but the averages are between sixty and eighty percent of your income at the time that you filed the claim. The average cost of the premiums will be between 1% and 4% of your income.
- Worker’s Compensation-This specific coverage is only available to claim if you become sick, or injured, due to something at work. The policy premiums are paid by the employer to cover all the employees that work for them. The amount of the premiums will be found through a formula used by specific classifications codes. The amounts paid out will be checks sent to the employee that averages sixty to seventy percent of the income at the time of the claim.
The five types of income protection insurance are usually offered through your employment, but many times the coverage amounts are not enough. Make sure you figure out how much the current policies will pay and get some supplemental insurance through a private insurer to ensure that you are covered.