Income protection insurance built-in & optional benefits
In some circumstances benefits can be paid under income protection policies such as Crisis and Specific Injuries benefits even if you are able to work at full capacity. This type of payment is only available through a select number of insurers in Australia, and may be beneficial to some.
Traditionally, income protection insurance has been thought of as a policy that provides benefits to people when they are unable to work due to sickness or injury, either totally or in a reduced capacity. Total disability is generally where you receive up to 75 per cent of pre-disability income as a result of being unable to work. Partial disability is paid where you are able to work but in a reduced capacity. With some insurers, you may earn up to 100 per cent of your pre-disability income before offsets occur.
Income protection insurance crisis benefits
Under some select policies, a benefit of six times the monthly benefit is paid as a lump sum to those who satisfy one of the listed conditions.
According to the Heart Research Centre (1), after a heart attack most non-manual workers will return to work after 4-8 weeks and manual workers 8-12 weeks.
Research from the Cancer Council in WA (2) shows that almost two-thirds or
67 per cent of cancer sufferers continued to work. Thus, a policy that has no waiting period and that will pay a benefit regardless of the ability to work can be of advantage.
Some features of a typical crisis benefit include:
- no 'waiting period' is required to be met
- by paying as a lump sum it's received tax free (3)
- you may continue to work at full capacity with no reduction to payment
* Please note that each policy has different benefits, terms and conditions around this. It is important that you read the relevant product disclosure statement (PDS).
Income protection insurance specific injuries benefits
This feature of select income protection insurance policies provides a minimum number of monthly payments following an event. What is sometimes missed is that these benefits are minimums. If you are still unable to work after this minimum payment you will be able to continue to claim as per normal procedures.
A specific injury benefit can mean many non-manual workers who may be able to work can still receive a benefit which can assist with potential additional costs such as transport to and from work and medical expenses.
It should be noted that you cannot typically claim a specific injuries benefit and crisis benefit at the same time. The benefit with a longer payment period will be paid.
So why are these income protection insurance benefits important?
Whilst Total and Partial Disability definitions will meet the many sicknesses and injuries that occur past the waiting period selected, certain conditions may not. Certain income protection benefits provide additional coverage while giving you the ability to continue working even though you may be suffering a listed fracture or medical condition, providing you with greater peace of mind.
Which income protection insurance benefits suit your situation more?
Be sure to read your products disclosure statement to find out if these extra benefits are offered.
To find out if these extra benefits can better protect your income speak to an xLife adviser. We can help you find the best policy to suit your needs, and compare income protection quotes.
References:
1. Heart research Centre: returning to work after cardiac illness. http://www.heartresearchcentre.org/files/information_sheets/returning_to_work.pdf
2. Cancer council Australia: Working with Cancer. http://www.cancer.org.au/cancersmartlifestyle/workingwithcancer.htm
3. ATO ID 2004/942 provides that a lump sum payment received by a taxpayer under the trauma terms of an income protection policy is not assessable income under section 6-5 or section 102:5 of the Income Tax Assessment Act 1997.
Source: CommInsure June 2010
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April 2011
