What happens to your income policy when you pass on?
Income protection policies are designed to help Australians protect their income by paying back 75% of their income in the event that they fall ill or sustain an injury that makes you temporarily disable. In the event where you pass on an income protection policy will not cover you. Although most policies do not explicitly state this fact, the policy will be terminated, due to the fact that the main beneficiary has passed on.
What are other exclusions I should be aware of?
Life insurance policies have terms that will differ from lender to lender and will also be determined on an individual basis. This is why it is vital that you read the product disclosure statement which outlines what your income protection policy offers and the exclusions that come with it. Some of the general exclusions that can prevent you from having your claim paid out are:
- An intentional self-inflicted act
- War, terrorism, unrest or insurgent activities in countries outside of Australia
- Travelling to a country which the DFAT has declared as a ‘Do not travel’ area
- Illness or injury sustained while committing a criminal offence
- During pregnancy, giving birth, miscarrying
- Termination of pregnancy (but you will still be covered if you sustain partial or total disability 3 months after the termination.
What other policy can I take out to protect my loved ones?
Thankfully, there is a wide range of life insurance policies that can be bundled up to protect you and your loved ones from financial instability. You can take out an income protection policy and bundle it up with life insurance or a funeral policy that will ensure that your loved ones are taken care of when you pass on. However, keep in mind that not all policies are the same. Speaking to an insurer or broker can help you compare options that are suitable for your circumstances.
How do I know I am getting the best policy?
Not all income protection policies are created equal, but doing your homework can help you find one that will adequately cover you. It is possible to get policies that cover 85% of your salary, but most policies will cover you for 75% of your income. Check your policies premiums to see if you will be getting the best value for your money.
Also, ensure that your policy will be able to cover you in terms of the occupation that you have. There are policies that are specifically designed to protect people who work in occupations where injury and illnesses are more likely to occur such as construction and nursing. Remember to always compare.