Choosing an Income Protection Insurance Policy - Part 2

What kind of cover do you want?

Once you've decided you want to take out cover, you need to consider how comprehensive you want the cover to be. The more comprehensive the cover, the more expensive it will be.

1. Do you want to receive a benefit if your disability is: - partial (eg you can return to work part time) or total

- permanent or temporary

2. Do you want to be covered if you are "disabled" in a broad or narrow sense? Different policies will consider that you are disabled if you are unable to do:
- your usual occupation
- any occupation to which you are suited by education and training or
- any occupation at all.

3. Do you want to receive a benefit for a disability that is the result of:
- an accidental injury
- sickness or illness or
- both?

4. If the policy covers sickness or illness, does it cover "pre-existing" illnesses?

A pre-existing illness is one that you:
- may have had before you took out the policy (even if you have recovered) or
- one that you had symptoms or treatment for (even if it was not severe enough to prevent you working).

This is particularly important if you are taking out a new policy each year (instead of paying an annual premium to continue an existing policy). The insurer may have the right to refuse a claim if you contracted an illness under one policy, but were not disabled until after you had taken out the new policy. The illness becomes "pre-existing" and is therefore not covered under the new policy.

5. How long do you want to receive benefits?

For example, benefits for temporary disability will usually be limited to a period of one or two years only.

6. Do you want to receive an insurance payment even if you are receiving other money?

Some policies will not make payments (or will reduce the amount they pay) if you are getting money from another source as a result of the accident or illness. For example, if you are getting workers' compensation or disability payments through Centrelink, the insurer could pay you less or not pay you anything.

7. Does your policy cover you if you aren't working when the disability occurs? For example, you may be between jobs or a seasonal worker moving from job to job.

See Part 1

See Part 3

© Australian Securities & Investments Commission. Reproduced with permission.