Income Protection Insurance for Australian Tradies

//Income Protection Insurance for Australian Tradies
Income Protection Insurance for Australian Tradies 2018-02-21T15:00:15+00:00
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If you can’t work who will pay your bills?

Income Protection Insurance or Personal Accident and Sickness Insurance can, but which one is right for you?

This is a really important question that you should be asking before buying an insurance policy to protect your income. There are some significant differences in the two main products available, Income Protection which is offered by Life Insurance companies and Personal Accident & Sickness Insurance which is sold by General Insurance companies. Income Protection is usually considered the more superior product, offering better long-term security, however in certain circumstances a Personal Accident & Sickness policy may be adequate for your needs.

As specialist income protection insurance providers, we will go into some detail to explain the key differences you need to consider, to help you understand the level of security and certainty they can offer you. After reading the information below, if you are still not sure then please do not hesitate to contact us so we can discuss your individual requirements.

The most important difference is probably that Personal Accident & Sickness policies are cancellable, which means the insurer can decline to renew your policy if there have been claims, changes in your health or if you change your occupation.

Income Protection policies in Australia are guaranteed renewable, which means that once issued, your policy is guaranteed to be renewed each year as long as you’re paying the premium, meaning the insurer can’t cancel your policy, increase your premium rates other than CPI and age, or put any further restrictions on your policy because of the number of claims you’ve made, a change in your health, a change in your occupation or sports and hobbies.

When on claim Personal Accident & Sickness and Income Protection policies provide a regular monthly payout until you are able to return to work, or if you are unable to ever return to work they will continue to make payments to you until the end of the selected benefit period.

With a Personal Accident & Sickness policy to claim for an injury, the injury has to be the result of an accident, it cannot be the gradual onset of a condition, for example a degenerative disc, whereas this would be covered with an Income Protection policy as long as the condition started after the policy was initially taken or the condition was disclosed and accepted by an underwriter.

When on claim Personal Accident & Sickness and Income Protection policies provide a regular monthly pay-out until you are able to return to work, or if you are unable to ever return to work they will continue to make payments to you until the end of the selected benefit period.

With a Personal Accident & Sickness policy, to claim for an injury, the injury has to be the result of an accident; it cannot be the gradual onset of a condition, for example a degenerative disc, whereas this would be covered with an Income Protection policy, so long as the condition started after the policy was initially taken, or the condition was disclosed and accepted by an underwriter.

A Personal Accident & Sickness policy will offer you a maximum benefit period of 5 years, but benefit periods are most commonly 2 years, and are generally indemnity style contracts. This means the monthly pay-out would be based on your income for the 12 months before the claim. (So if your income is less than stated because you’ve been on an extended holiday or have had a slow year etc. you will come up short).

An Income Protection policy can offer you a range of pay-out periods from 2 years through to the age of 70 depending on your occupation. They can be an Indemnity contract which will look at the best 12 months in the 3 years before the disability, or an Agreed-value contract which means that we can prove your income upfront and this guarantees that the insurer will not review or reassess the monthly pay-out shown on the policy in the event of a claim.

Both types of policy typically provide cover 24 hours a day and will cover you world-wide.

A Personal Accident & Sickness policy would ordinarily cover up to 85% of your income, for between 1 and 2 years. Some policies can be taken with a zero-day waiting period, but more commonly have a 14 day wait.

An Income protection policy covers up to 75% of your income, (which can be increased to 80% using a superannuation continuation benefit), with a minimum waiting period of 14 days, (you can have the option of 30, 60 or 90 days, 1 or 2 year waiting periods) with more flexible pay-out periods of 2 years, 5 years, to age 65 or to the age 70. Depending on your occupation, you can also get an optional one day accident waiting period.

Whereas Personal Accident & Sickness policies can be taken as an accident-only or as an accident and Sickness policy, Income Protection is a total offering, so if you take a benefit to age 65 you will be covered for both injury and sickness until that time. Keep in mind that illnesses are more likely to keep you out of action for a long period.

George, is a qualified carpenter, and has a Personal Accident & Sickness policy. George decides he is tired of being a carpenter and wants to pursue his lifelong dream of being a cray fisherman. Under his Personal Accident & Sickness contract, George would need to inform the insurer that he has changed his occupation. It will then be up to the insurer to decide if the policy would continue and under what terms. It is unlikely that George would get his cover renewed as a cray fisherman. With an Income Protection policy, the cover would continue as if George were still a carpenter, and a disability claim would be measured against the duties of his new, more hazardous calling. So if George was unable to work due to an injury, he would be paid his monthly benefit until he was able to return to the seas.

Personal Accident & Sickness and Income Protection policies have standard exclusions, these often differ from one insurer to the next. As a general rule, Personal Accident & Sickness policies have a far broader range of exclusions than Income Protection policies as they are not underwritten upfront. For example, a Personal Accident & Sickness policy will automatically exclude: training for or participating in professional sport of any kind, results from any pre-existing medical condition, results from any intentional self- injury, suicide or any illegal or criminal act committed by the policyholder or a Covered Person, plus more (refer to the applicable insurers PDS for full details).

Income Protection policies also have a range of exclusions but are fully underwritten and are issued based on the outcome of the underwriting assessment, giving more certainty in the event of a claim (refer to the applicable insurers PDS for full details).

If you’re looking for an income protection insurance broker, contact Trades Insurance today. We will provide a bespoke policy which is tailored to your specific circumstances and requirements.

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Frequently asked questionsIncome Protection
(life insurance policy)
Personal sickness and accident – PA & S
(general insurance policy)
What am I covered for?Accidents or Illnesses in or out of work.Accidents or sickness in or out of work.
How much cover can I get?Between 75 & 80 per cent of your provable pre-disability income with the addition of some add backs.Generally 85 per cent of provable pre-disability income
Can we agree on an amount of cover?Yes. It can be agreed value, with financial evidence to be provided either at policy commencement or claim time.No. The benefit is the lesser of the sum insured and the 12 month of income proceeding the disability
Can the insurer cancel my policy?No. All income protection policies are guaranteed renewable as long as the premiums are paid. With a few exceptions: e.g. non-disclosure.Yes. Policies renewable yearly, and may be cancelled at insurer’s discretion.
How long is the benefit period?Can be for 2 years, 5 years to age 65 or through to age 70 depending on your occupation and dutiesGenerally 2 years, but no more than 5 years.
Are there things that won’t be covered?Yes. Refer to the applicable insurers PDS for full detailsYes. Refer to the applicable insurers PDS for full details
Will there be any medical test?Income Protection is fully underwritten. This means that we will ask you a range of questions about yourself, your lifestyle and occupation, so that an underwriter can make an accurate assessment of the risks. This could mean that there will be some additional medical information required. This is done so that if there is a claim we have the best possible chance of getting it paid without delay.All pre-existing conditions are automatically excluded, if there is a claim your medical records will be reviewed and any pre-existing conditions will be taken into account.