How Does Income Protection Insurance Work?

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Every year, thousands of people find themselves temporarily or permanently unemployed due to an aggravated illness or injury. Accidents happen. If ever you find yourself in such a position, would you be able to live on your paid sick leave or savings? If not, you’ll need to have other ways of sustaining yourself.

Income protection insurance comes in handy in situations like this. It’s been developed to help you support your lifestyle and manage your monthly bills. Before you subscribe to this, make sure you don’t already have income protection insurance from work—some companies have that as part of their employee benefits. Find out more below.

How does income protection insurance work?


Income protection insurance is a form of disability insurance that helps individuals who have a long term or short term disability due to an illness or accident. It doesn’t matter if you’re an employee or small business owner, it guarantees you disability coverage. You’ll receive consistent income until you can go back to work or retire. This will help you focus on your hospital appointments and recovery journey without having to worry so much about your bills.

The type of job you do plays a huge role in determining how much you receive. Income protection insurance payouts are mostly based on a percentage of your income, generally between 50% to 70%. Payments are, however, devoid of income tax. You may not be able to claim payments right after you fall sick or become incapacitated. What’s more, you generally will have to wait for a minimum of three weeks, mostly because you may not need the money immediately if your employers grant you paid sick leave.

Besides income protection insurance, there are other illness insurance policies you could seek out, like critical illness insurance. You can also juxtapose income protection insurance with other sorts of illness-related insurance policies before you settle on whether to subscribe to it or not.

If you’re a self-employed entrepreneur, for instance (even after an injury), you’ll try all avenues for growing your business because you know you need the money to support yourself. It’s in situations like this that you can likely claim income protection. This further minimizes the financial effects ill-health can have on you and your loved ones and will also give you peace of mind.

But suppose you insist on growing your small business to raise some money. In that case, you can find information on sites like Kacerr for the best way to achieve your small business goals. They offer detailed articles from several industry professionals on marketing strategies your business can capitalize on for growth.

Benefits of income protection insurance.


Depending on the country you live in, having income protection insurance guarantees regular benefits. For example, in Australia, it offers a maximum of 75% of your monthly pre-tax income. If you’re unclear about the type of insurance products you may be eligible for, you can find out with a simple online search, and platforms like iSelect will help you out. They’re Australia’s number one go-to destination for comparing insurances, personal finance products, and utilities from a range of providers.

That being said, the main benefits of income protection insurance are many and varied.

Countries like Australia offer these total disability insurance benefits when a person is completely disabled. However, you must be in the same state solely due to the injury or illness throughout the waiting period, otherwise you won’t be eligible for this benefit. You also should be unemployed and actively undergoing medical care.

To receive partial disability Income insurance, you must be capable of working or gainfully employed, actively undergoing medical care, and must still be disabled for the whole waiting period.

You’re given a chance to decide if you wish to have your cover grow each year according to the cost of living. This will increase your premium each year. What’s more, in some countries, Inflation Protection naturally increases your income protection cover by about 3 percent each year. If you’re rendered totally or partially disabled from the same, similar, or related cause within a year after a claim has ended, you don’t have to go through a waiting period again because a recurrent disability benefit is treated as a continuance.

You’re eligible to sign up for a concurrent disability benefit if you’re rendered totally or partially impaired due to two individual unexpected injuries or illnesses. With this, just one benefit is redeemable under income protection insurance.

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