What you should be covered for with income protection

Of all the types of insurance available income protection (IP) is one of the most important.  What it attempts to secure is the income a breadwinner is bringing in while they are hopefully recovering from a medical condition or accident that prevents them from working.

Why is it so key to make sure income is still coming in in this situation?  We-ll because not only is the person or family still facing all their usual day to day expenses, they are also often having to deal with multiple bills on top of this related to the illness or injury.

Now you can take out income protection and there is a wide range of policies on the market.  The most important thing is your policy needs to cover you for the events that statistically happen most frequently.  In this continuing Rate Detective series on claims we are going to look at just that.

Once again we’ll look at data supplied by AIA Australia, one of this country’s leading providers of income protection.

So, musculoskeletal events accounted for approximately 40% of all IP claims AIA paid out in 2014, no big surprise there, most of us need our bodies functioning to go to work effectively, even if we don’t work in a directly physical role.

But how about the second category, mental health?  This accounted for almost 15% of IP claims.  I wonder how many of us would think about that being the second highest cause of us not being able to go to work when we’re seeing what a policy covers.

No surprise with the number three ranked cause, its cancer (excluding breast cancer), they accounted for around 12% and I think we’d all be checking our policy included this potential illness.

After this came neurological conditions at around 5% and breast cancer at around 4%.  Of course when you look at the breakdown by gender breast cancer accounted for 9% of female claims so that is significant.

To give you an idea of the dollar amounts connected to these claims see the list below provided by AIA.  They’re noted by job title, the condition or injury, the person’s age and the amount paid.

Examples of IP claims paid in 2014 

  • Physiotherapist, Breast cancer, 54, $28,188
  • Accountant, Shingles, 52, $8,176
  • Environmental Research Scientist, Melanoma, 47, $117,439
  • Sales Representative, Depression, 51, $85,505
  • Hairdresser, Stroke, 22, $26,709
  • Animal Trainer, Chronic back pain, 32, $2,060
  • Carpenter, Fracture, 37, $153,543
  • Architect, Broken thighbone, 58, $68,486
  • General Manager, Parkinson’s disease, 49, $52,991

You’ll note that the injury or condition doesn’t always logically correlate to the persons occupation and this is a key point.  Don’t just assume you should be covered for what you think might happen in your workplace, just because you’re getting a work related insurance.

Many insurance policies have exclusions on mental health or back conditions.  It’s important to understand what is covered and what is not covered in your policy.  If you are fit and healthy and have no pre-existing conditions, the insurance companies on Rate Detective’s panel have no built in exclusions.

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Published on July 7-th, 2015 in Income Protection Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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