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There are many benefits that insurance protection plans offer as opposed to other types of insurance that include unemployment insurance, personal accident and sickness insurance etc. When a policyholder becomes sick or meets with an accident after the deferred period has passed the benefits are payable until term of contract or retirement, earliest of death or recovery. The benefits are tax free and are paid out regularly either weekly or monthly. Provided the insured continues paying their premiums, an insurance company cannot refuse to renew or cancel a policy. You can also request a waiver of premium whereby the policy is not required while policy is paying benefits, although the policy cover will still continue as normal. The period between a valid claim and the start of benefit payments is known as the deferred period, and the period chosen also significantly influence the cost of the policy. While a policyholder is recovering, and takes up a lower paid job or part time job, some insurance companies will still pay a proportionate benefit to the policyholder. Income protection insurance Australia is only valid to policyholders that are resident in Australia, although most insurance companies will allow for residence working outside of Australia and will allow for holidays. There are some restrictions that can affect eligibility for income protection cover such as when a policyholder is retrenched or becomes unemployed. As the deferred period increases the premium payments decrease. In most instances no benefits will be paid out in the event of an accident or illness arising from alcohol or drug abuse, pregnancy, wars, criminal acts or intentional self harm. The maximum regular payment is usually restricted because of benefit limits which prevent the benefit exceeding the insured’s income. If the insured changes their occupation the policy may become invalid or the premiums increased due to new risk. Policyholders can expect a tax reduction and benefits are tax free. In addition there are product variations such as renewable income protection insurance, which allows policyholders to renew their policy as well as increase their cover. As the policyholder gets older, the premiums will increase with each renewal which is based on the general rates and not on the policyholder’s claims or health. Income protection insurance premiums increase as the policy erodes over time due to inflation, and benefits may increase at an indexed rate, a percentage chosen by the insured or a fixed percentage. Income protection insurance has no investment element and no surrender value and the premiums are usually higher than a standard insurance. IPI is not a suitable insurance for unemployment, and only provides a monthly income in the event you fall ill or meet with an accident.
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