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Everything You Need to Know About Income Protection Insurance

By  AAMI

Income protection can help you out of a tricky situation if you ever find yourself unable to work due to injury or illness.

There are certain things no one wants to think about. Life insurance and income protection sit in this box - no one wants to believe they’ll need the cover one day. Being unable to work, due to illness or injury, is something that may happen. And the financial impact of this can be huge.

It’s for this very reason that income protection should be considered by all Australians, no matter your financial situation, especially if you have family or loved ones who depend on you and your income.

Income Protection Insurance can help you stay on top of bills, credit card repayments, school fees, or even basics like food, so you can focus on recovering.

Income protection policies vary greatly though, so it’s important to do your homework, including exploring the different premium options, the length and amount you’re covered for and what circumstances enable you to lodge a claim.

What are the different benefit periods?

The benefit period - the maximum amount of time the policy will pay out following a claim - is one factor that impacts how much income protection insurance premiums will cost. With AAMI Income Protection, the benefit period can range between six months and five years, depending on the type of policy you choose and your age.

Generally, the longer your benefit period is, the higher your premiums will be. It’s important to carefully consider an income protection policy’s benefit period to ensure you won’t be in a situation where you still can’t return to work, but your benefit period lapses.

What does a waiting period mean?

Another factor that impacts your premiums is the waiting period - the length of time you’ll wait between the illness or injury and the first payment of the benefit. With AAMI Income Protection, the waiting period is between 14 and 90 days. Once the first payment is made, the benefits will continue until you recover or if the benefit period is finished, whichever occurs first.

What impact does my age and profession have on income protection?

Usually, there is an upper age limit on when your benefit payments may stop. This varies from provider to provider so always double check what your chosen policy says. Generally, it’s between 60 and 65 years old.

In terms of profession, generally speaking, income protection will not cover your entire income. Rather, most policies cover up to 75% of your income and place a monthly cap on the amount you receive each month. For AAMI income protection, the cap is $10,000 a month. The 75% is taken as the average of the last 12 months’ pay at the time of the claim.

Your profession though may impact the amount of your premiums. For example, income protection for someone who works in mining may involve a higher premium than an office worker, simply due to the level of risk to injure yourself.

Moving forward with income protection

When deciding which income protection policy to take out, always research all your options as every policy differs and every policy provider will offer different types of assistance.

If you’re interested in how much a policy may cost you, get a quick quote on the AAMI Life website. You’ll also be able to do a quick comparison of the different levels of cover so you can make a fully informed choice.

Read more:

AAMI Life Insurance products, other than in some circumstances the Redundancy Benefit, are provided by either Asteron Life & Superannuation Limited ABN 87 073 979 530, AFSL 229880 (Asteron) or by TAL Life Limited ABN 70 050 109 450 AFSL 237848 (TAL Life) which is part of the TAL Dai-ichi Life Australia Pty Limited ABN 97 150 070 483 group of companies (TAL). Both Asteron and TAL Life are part of the TAL Dai-ichi Life Australia Pty Limited ABN 97 150 070 483 group of companies (TAL). TAL companies are not part of the Suncorp Group. TAL companies use the AAMI brand (a Suncorp network brand) under license. Any advice on this page in connection with the Life products is general in nature and is provided by Platform Ventures Pty Ltd ABN 35 626 745 177 AFS Representative Number 001266101 (PV). PV is part of the Suncorp Group and an authorised representative of TAL Direct Pty Limited ABN 39 084 666 017, AFSL 243260 (TAL Direct). General advice does not take into account your individual needs, objectives or financial situation. Before you decide to buy or to continue to hold a Life Products you must read the relevant Product Disclosure Statement.