The application process for income protection
How does the application process for income protection work?
Like most insurance products, income protection in Australia is risk-rated, which means that your insurance premium will vary depending on how likely you may be to make a claim – in other words, how risky you are to insure. Your income protection insurer will assess this risk, and your premium will be calculated accordingly.
During the application process for income protection insurance, you may come across exclusions for pre-existing medical conditions. It’s important that you’re honest with the insurer when you apply, as you might not receive an income protection benefit at all if you don’t make full disclosure when completing the policy application.
You can apply for income protection cover with an insurance company, through your superannuation, a financial adviser or an insurance broker such as Compare the Market. When you apply for income protection insurance through us, we aim to make the application process as seamless as possible. In most cases, applications can be completed over the phone. An application specialist will ask a series of questions ranging from your occupation and income details to personal and family medical history. Your application will then be lodged with the insurer to be assessed and underwritten.
What are factors that affect your income protection application?
While the specific factors that affect your eligibility for income protection will differ between underwriters, here are a few common pieces of information that Australian insurers might require on your application form:
- Gender
- Residency status
- Hobbies and pastimes
- Date of birth
- Smoker status
- Occupation
- Gross annual income
- Medical history.
These are only a few of the most common requirements. Your chosen insurer may require further information, such as details of your primary treating medical practitioner. Depending on your disclosures regarding the insurer’s requirements this may result in your cover being accepted, declined or issued with an exclusion or premium loading that increases your cost of cover.
More income protection information
Do you need income protection?
To decide if you need income protection insurance, consider the regular expenses needed to maintain your quality of life and any debt repayments you need to make to avoid financial hardship.
For the self-employed, small business owners and sole traders who aren’t eligible for sick leave or workers’ compensation, income protection can be a vital form of financial support if something happens to you. This is true for anyone who couldn’t support themselves if they were unable to work for some time. If you can’t work due to a serious illness or injury, income protection can replace a percentage of your income each month for a set period of time.
What to look for in an income protection policy?
If you haven’t yet decided on which insurer you want to go through for income protection cover, there are a few things you’ll want to consider before signing an insurance contract.
First, you’ll want to consider the level of cover you’re taking out; this is the percentage of your monthly income that you receive as a benefit payment. The maximum benefit percentage available from most insurers is 70% of your regular income. Some insurers will offer the maximum percentage at the start of your benefit period and reduce it over time. You also might get a reduced payment if you’re still able to work part-time.
Another thing to consider is the benefit period offered by your insurer. This is the total amount of time that you’ll receive your monthly benefit payments. This could be a set number of months or years (e.g. six months or two years) or until you turn a certain age (e.g. when you turn 65).
You’ll also want to look at your income protection policy’s waiting period. Depending on your policy, you may have to serve a waiting period after the date your illness or injury has caused you to stop working, before you can claim on any income protection insurance benefits. This could be anything from a few weeks to even years.
For the full terms of your income protection policy, refer to the relevant Product Disclosure Statement (PDS) or talk to the insurer directly. Also, be sure to read the Target Market Determination (TMD) to make sure the product is right for you.
How do income protection payouts work?
If it comes time to make an income protection claim, there are a few things you’ll need to know to ensure the claims process runs smoothly. You should first contact your insurer, who’ll explain the process in greater detail and assist you with progressing your claim. This process can be done over the phone, though you’ll likely need to fill in a claim form.
Certain conditions will need to be met in order to qualify. For instance, you may have to spend a certain amount of time off work before you can receive any income protection payments (e.g. 30 days). Additionally, you should ask your insurer whether they waive premiums during the claims period. Learn more in our insurance guide to income protection payouts.
Meet our life insurance expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy and our expert in income protection insurance, Steven Spicer knows just how valuable it can be to have a policy that could support you and your family through a difficult time. Steven is passionate about making income protection more accessible to everyday Australians by helping them understand and compare their options.
Steven has 20 years of experience as a people-first business leader, with a focus on creating services that put customers first.