What is a benefit period and which one is best for you?

Last updated on November 25th, 2021 at 03:19 pm by Bill Tsouvalas

Income protection is a life insurance policy that pays up to 75% of your income should you be unable to work due to an injury or illness. The length of time that you have agreed with your insurer to have your income protection paid out is known as a benefit period. It is helpful to know which benefit period will work for you and the effects it will have on your income protection policy.

The length of a benefit period

When you take out an income protection policy you have the choice of choosing between a 2 to 5 year benefit period. The length that you choose will affect your premiums. A longer benefit period usually comes with higher premiums. A shorter period means that you will have lower premiums, but the pay-out will be for a short time. Therefore, you need to carefully consider your period. Speaking to a financial advisor or your insurer will help you know which will be more suitable for your lifestyle or the type of occupation you have.

Considerations when choosing a benefit period

To get the most out of your benefit period it is important that you consider various factors such as being able to manage your everyday living expenses and how you will be able to pay off your bills and debt. Always keep in mind that your income protection policy is something that will take the place of your salary when you are no longer able to receive one due to falling ill or sustaining an injury. Therefore, all the expenses that you had to pay when you were still receiving a salary need to be taken into consideration.

Be aware of the waiting period

Being aware of the fact that there is a waiting period before you will be able to access your income protection will help you better prepare your finances. The typical waiting period varies from 14, 30, 60, and 90 days. Your insurer will only be able to approve your claim once they have been given the go-ahead by your medical practitioner who will be able to vouch that you are unable to work due to an injury or illness you have.

What can cause your benefit period to end?

When taking out a policy the three main important things you need to know is; how much will it cover you for, what features does it come with, and what will cause it to end. When it comes to your income protection policy, the only reason why it will end is because:

  • Your policy has expired which means the policy has been cancelled due to you not paying your premiums or cancelling the policy yourself.
  • You have returned to work due to your injury or illness becoming better, allowing you to work.
  • You have passed on and your policy doesn’t include any beneficiaries.
  • You have breached your contractual agreement. Your insurer can cancel your policy if you have breached the agreement that is outlined in your policy or if you have handed in false information.