Wealth

Simplifying Income Protection: How do you want your policy?

2 November 2017

Income protection insurance can help cover your financial commitments if you find that illness or injury means you can’t earn an income.


The amount you can be paid, after making a claim, will vary between insurance providers.

Different providers can offer payouts over longer, or shorter, periods of time and have different waiting times before you can claim.

Some products, like the Rate Saver plan with Insuranceline will cover up to 85% of the insured person’s income to a maximum of $10,000 a month. For example, real estate agent John*, aged 36, earns $10,000 (before tax) each month.

He is healthy and doesn’t have any poor lifestyle habits (like smoking), but was hurt and couldn’t work. He was covered under Insuranceline’s Rate Saver plan, so, after his 14-day waiting period, he received $8,500 each month for the six months it took him to recover.

When he set up his Rate Saver policy, John chose to get payments for up to 24 months (he could have chosen from six months, 12 months, 24 months or 5 years), so even if he needed more than six months to recover, he still would have been able to receive payments.

Your job is a factor which can determine how much you’ll be expected to pay in premiums. The higher the risk, the more expensive premiums will be. A ‘safe’ occupation, like John’s real estate job, is considered low risk. A job that’s considered high risk (where premiums can be higher) is one where there’s a high possibility of danger or injury, like if you work as an underground miner.

The type of policy you take out can make a difference to what you are covered for and under which circumstances you are able to make a claim.

At Insuranceline there are two types of Income Protection Insurance policies, one has underwriting (Rate Saver) and the other has no underwriting (Time Saver). Policies with no underwriting have more restrictions on what’s not covered. You can read about the different specific policy details between Rate Saver and Time Saver here.

Underwriting is a process by the insurer which assesses the risk of a policy before it is given. That's how premiums are calculated.

While underwriting helps create a more accurate policy, it can take longer to apply for because there are questions that the insurer needs to ask about your medical situation, lifestyle, occupation and hobbies/pastimes.

Factors like age, gender, occupation, lifestyle choices and pre-existing conditions can make a difference to the premium amount you can be expected to pay to take out a policy.

To continue the example above, Jack is John’s elder brother and is 42 years old. Outside of his job as a building site inspector, Jack leads an inactive lifestyle but has back issues which are considered a ‘pre-existing condition’. This doesn’t mean that Jack wouldn’t be eligible for Rate Saver Income Protection, however his health issues might be excluded on his Income Protection Insurance.

Jack may decide to take Time Save insurance for a number of reasons, including:

  • It’s quicker to get covered
  • He may not require more than $7,500 cover
  • He’s happy with a 4 week waiting period
  • He doesn’t need the option of 5 years of payout
  • He doesn’t want to answer medical questions

The waiting period also differs according to policies and insurance providers. John, with his Insuranceline Rate Saver policy, only had to wait 14 days before he could lodge his claim (if he chose a longer waiting period, like 28, 60 or 90 days, he could have reduced his premium). Building Inspector Jack, with his Time Saver cover, was not able to choose his waiting period and had to wait 28 days before making a claim.

Both Jack and John could also add optional extras onto their Income Protection cover at an additional cost.

Optional extras can include things like the Holiday Injury Benefit, which pay an extra one-off payment of up to $3,000 if you’re injured during state school and public holidays, or if you’re injured more than 200km from home.

Insuranceline's Income Protection quote tool will give you an idea of how different factors will impact your policy and the premiums you could expect to pay for Rate Saver and Time Saver Income Protection Insurance.


*Not a real customer, an example used for the purpose of this article only.

Products issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848. Involuntary Unemployment Cover issued by St Andrew’s Insurance (Australia) Pty Ltd ABN 89 075 044 656 AFSL 239649.

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