How Income Protection Insurance Can Help — A Brief Review

Income protection insurance most often becomes beneficial when you become unemployed temporarily due to injury, accident, or illness. Even if it covers 75% of your gross annual income, not all companies can offer you a redundancy cover. So, go through the terms and conditions of the policy whenever you purchase one to know fully about the inclusions.

What is Redundancy Insurance?

Redundancy insurance or unemployment cover is one of the income protection claims referring to policies that pay monthly income benefits in the event of involuntary redundancy or job loss. It is specifically an income protection insurance, but the rewards may be temporary or permanent.

Depending on the time span of the cover, the premiums will also change. For example, you could have to pay a higher premium if you are looking for benefits for more than one year. Likewise, remember that all income protection policies will not cover redundancy.

Time of Coverage

The extent of cover is based on the insurer. The standard period for this type of insurance is 12 months. If you need cover for 24 months, a higher premium will have to be paid.

Eligibility Requirements

In Australia, redundancy cover is given solely to those who meet certain criteria. In order to apply, you need to be an Australian resident. Some insurers even accept 457 visa holders. You should also be in the age range from 18 to 65 years.

Since redundancy cover is not meant for unemployed people, it is vital that you are maybe engaged in full-time employment for a span of one year. This rule applies even when you need to make income protection claims. Besides, you will only receive the rewards if you have become unemployed owing to illness, injury, or accident.

It will not cover unemployment once a fixed-term contract has expired. At the same time, self-employed individuals are not covered by the policy.

TPD Insurance Policies

There are specific companies, as well as many others in Australia, that offer several main types of financial assurance packages. Term life insurance is the standard one and the oldest version. In exchange for making fixed payments, the policyholder is assured that if s/he dies or is diagnosed with a terminal illness during the term of the policy, the beneficiary will get a fixed amount of money. The main utility of this kind of insurance policy is to cover funeral and other death-related expenses.

Total permanent disability (TPD) insurance on the other hand offers protection in the event of the policyholder suffering a permanent and total disability. One example is making a TPD claim for mental illness. The policies of this nature differ from the first in that they are not limited to a pre-determined term but apply for the rest of the policyholder’s life.

The main benefit of this policy claim is to offer financial stability for both the policyholder and his or her family and dependents in case s/he is not able to work.

The same type of policy is offered by life insurers in Australia in the form of income protection insurance. Basically, this is a policy that specifically offers a guarantee of up to 75% of a policyholder’s monthly income if s/her is, not able to work owing to a documented sickness or injury.

The Bottom Line

Having said that, when it comes to a TPD claim for mental illness or a trauma insurance claim, it is much more important to speak with an adviser. An insurance claims adviser knows the ins and outs of policies and they work for you, rather than for the insurance company.