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Income Protection Insurance

Income protection is a way to make sure your regular monthly bills and expenses will be paid in the event you become ill or injured and unable to work. This type of policy pays up to 75% of your regular income for an agreed period of time.

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Who is a potential candidate?

Ultimately it is you that will need to determine this. However you should ask yourself the following questions: Health insurance will pay your medical expenses, but how will all your other expenses be paid? Who will cover the car payment and the mortgage if you're suddenly unable to work? Who will pay for groceries when you have suffered loss of incomes? Income protection is a possible answer to this problem. if you have a significant amount of savings or even have a large redraw facility in your mortgage, you may be ok for a while, however all bills need to be paid eventually and you should examine your finances carefully to work out if you can afford 6 or 12 months off work or even longer.

What typically does it cover?

This policy provides regular payments to you, as if you were still getting a paycheck, if you become injured or ill. When you buy the policy, you choose how long you'll have to wait after the injury/illness occurs before the policy will begin paying you. This enables you to exhaust any sick leave or other time-off-work benefits you may have before turning to this insurance.

Also, it will usually pay your superannuation contributions, and many automatically index for inflation each year.

What typically does it not cover?

Income protection cover does not take care of you unless you are actually too ill or injured to work. It does not pay out forever; when you take out the policy, you choose how long the benefits will be paid to you, generally a year or two. Most companies won't continue your income protection policy if you are over 60. Also, if you are a small business owner,it will not cover the expenses to keep your business running while you are recovering. In addition you may need to wait anywhere between 14 - 720 days for the benefits to kick in. With many policies you get to determine the waiting period and this of course affects your premium.

Additional coverage that policy holders can look at reviewing for this type of product

Many people that hold income policies that own a small business also carry business overheads coverage, which will pay the usual operating costs to keep your business afloat while you are unable to work. Trauma policies make sure you're well-covered in the event a traumatic event such as a heart attack or stroke. And don't forget life cover, to protect your family in the event of your death.

Additional coverage
Illnesses or injuries covered can vary by company and by policy. Some offer options that will take care of you while you're out of work after cosmetic surgery, in a rehabilitation program, or on unpaid leave for maternity, sabbatical or other reasons. Some policies will even cover you if you can continue to work, but at a reduced ability than what you could do before your injury or illness. Other optional benefits include paying for the lost income of a family member who must leave work in order to care for you.

What will it typically cost?

The premiums for this type of insurance vary not only by company but also by what benefit options you choose, how high your income is and how much you'll need to replace with payouts from the policy, whether you buy the policy on your own or through your employer, etc.

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