Income protection insurance Frequently Asked Questions (FAQs)

 

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Frequently Asked Questions (FAQs)

For the policies that can be arranged directly through Choosi, any Australian resident aged 18 to 59 (inclusive) working a minimum of 15 hours a week can apply for income protection insurance. Some exclusions do apply, so you’ll need to review the Product Disclosure Statement of the policy you’re interested in for further information.
You’ll need to work out the level of cover that you need, by looking at what bills that you have coming in monthly (mortgage, personal loans, general living expenses, etc.). The policies available through Choosi will insure up to 75% of your pre-tax income, up to a maximum monthly amount insured of $10,000. 
Income protection insurance is designed to help you financially if you can’t work for an extended period of time due to an injury or serious illness (commonly referred to as a ‘disability’ in the context of income protection insurance) that’s covered by your policy. It works by paying you a monthly income benefit that’s typically up to 75% of your pre-tax income, capped at $10,000 per month. For full details of what’s included with the cover you’re interested in applying for, you should read the Product Disclosure Statement.

Generally, you won’t be covered for an illness or injury due to:

  • Intentional self-harm or attempted suicide
  • Mental disorders
  • Using recreational (or misusing) drugs or alcohol
  • Pregnancy and/or childbirth
  • Wars and/or riots
  • Engaging in illegal activities
  • Pre-existing medical/health issues
  • Elective surgeries/treatments

Other exclusions may also apply. For full details of what’s excluded from the cover you’re interested in applying for, you should read the Product Disclosure Statement.

Generally, for policies that can be arranged directly through Choosi, premiums are tax-deductible. As individual circumstances vary, you should consult a professional tax adviser about your particular situation.

An income benefit will pay you a monthly payment (for the benefit period you choose) if you can’t work for an extended period of time due to an injury or illness that’s covered by your policy. When you apply for income protection insurance, you’ll need to nominate the monthly amount you wish to be insured for. For policies available directly through Choosi, you can choose cover for up to 75% of your pre-tax income from a minimum of $1,000 up to a maximum of $10,000 per month. The income benefit is calculated as whichever is the lesser of your monthly insured benefit amount or 75% of your pre-tax pre-disability income at the time you claim. 

For example, if you currently earn $5,000 per month pre-tax, you can choose a maximum monthly amount insured that’s 75% of this income, which is $3,750 ($5,000 x 75% = $3,750). However, if at the time you claim, your pre-tax income has actually changed to say, $4,500 per month, then your income benefit will be calculated on this lower amount, which will be $3,375 ($4,500 x 75% = $3,375). Conversely, if your income has increased since you took out your policy, and you haven’t contacted your insurer to update your monthly amount insured, then your income benefit will be calculated based on your original recorded income. To put it simply, your income benefit can never be more than 75% of whichever pre-tax income is less at the time you claim.

Additionally, if you’re receiving other payments such as worker’s compensation, government payments and have other sources of income, then these amounts will also reduce your income benefit. For example, if you’re receiving $1,000 in worker’s compensation and no other payments/income, then based on the first example, your income benefit will be $2,750 ($3,750 - $1,000 = $2,750).

Lastly, bear in mind that there’s a limit on benefits, meaning that only one income benefit is payable at any time while you’re covered, even if you were to suffer from more than one injury or illness at the same time.

Insurance premiums are calculated based on the type and level of cover that you’re applying for as well as the risk. Insurers determine your risk based on the likelihood of you getting seriously ill or suffering an injury, and the higher your risk, the higher your insurance premium is likely to be. The main factors taken into account when assessing risk for income protection insurance include age, health, smoking status, and occupation.
The amount of cover you need and apply for will depend on your needs and your personal circumstances. When calculating how much cover you need, you’ll need to consider how much money you’ll need to meet your day-to-day living expenses, service any debts, and cover any costs for recuperation. You’ll need to consider that the level of cover available to you will depend on your pre-tax income and as a general rule, most policies will only provide cover up to 75% of pre-tax income. For policies available directly through Choosi, the maximum cover is $10,000 per month.
Generally, no. If your partner is a homemaker, you can include your partner on your policy if a homemaker option is available. However, they’ll need to verify their details in order for the application to be processed.
No. If you work, you’ll need to take out your own policy, but if you’re a homemaker, and your partner works, they may apply for cover and include you in the policy if a homemaker insurance option is available. You’ll need to also verify your details in order for the application to be processed.
Yes, if your circumstances change and you need to increase or decrease your level of cover, you can apply to do this by simply contacting the insurer. For products directly available through Choosi, you can’t increase your cover beyond 75% of your pre-tax income, capped at $10,000 a month.
Yes, as long as you work at least 15 hours a week and you have held this position for at least 12 months, you’ll be able to apply for cover. Your income is generally determined on a pre-tax basis after all expenses associated with the generation of that income have been taken into account.
Yes, as long as you’ve been self-employed for at least 12 months and work for a minimum of 15 hours per week, you’ll be able to apply for cover.
Generally, your premiums are tax-deductible if you have an income protection policy outside of your super. However, you should note that any income benefit you receive will be assessable for income tax purposes. You should consult your tax advisor for your particular situation.
Your cover will generally start as soon as your application has been accepted by the insurer that you choose to take out your policy with. Your first premium is deducted from the policy commencement date, which will be set out in the policy schedule.

When applying for your policy, you’ll need to select a waiting period and a benefit period. 

For policies available directly through Choosi, a waiting period is a period you must wait that’s either 30 days or 90 days before you’re entitled to receive the monthly income benefit. You must also be ‘disabled’ as defined (i.e. suffering from an illness or be injured) continuously during the waiting period and remain continuously disabled after the end of the waiting period (and not be working), to be eligible to claim. The first day of the waiting period is the same day that you’re diagnosed by a medical practitioner as being ‘disabled’. If you become eligible for income benefit payments, you’ll be paid in arrears. For example, if you choose a 30-day waiting period, then you’ll be paid 60 days after you were first eligible to claim (30 days for the waiting period plus another 30 days in arrears). 

A benefit period is the maximum period that you’re eligible to receive the monthly income benefit, and for policies available directly through Choosi, you can choose a period of 6 months, 1 year, 2 years, or 5 years. The benefit period begins at the end of the waiting period and continues until the end of your chosen benefit period; the date you’re no longer ‘disabled’; after you turn 65; or when your policy ends, whichever of these events happens first. 

You can’t include a working partner on your policy and they’ll need to take out their own individual policy.
Yes, you’ll need to read the policy summary details to find out what options are available. As a guide, some insurance policies have the option of adding a rehabilitation benefit to help you recover and get back to work, and a homemaker insurance option to help take care of things at home while you rest and get better.
It’s worth considering if you need both policies as life insurance and income protection insurance cover you for two different purposes. Life insurance covers you if you die (or get diagnosed with a terminal illness for some policies) and will make a payment to your family to help them cover bills and living expenses. Income protection covers you if you get sick or injured and can’t work for an extended period, helping to take care of your living expenses while you recover. 

Your premium is determined by a number of factors including:

  • your occupation;
  • your age, gender, and smoking status at the time of the application;
  • the cover amount (selected by you);
  • the benefit period (selected by you);
  • the waiting period (selected by you); and
  • other factors such as your health, family history, and participation in hazardous activities
Yes, you can still apply but it’s up to the insurer to determine if your job is too high risk to insure. You should note that if your application is accepted, you may have to pay higher premiums if your job is deemed risky by the insurer.
If you’re receiving income benefit payments, in most cases, you don’t need to pay your premiums until you return to work or until the maximum benefit period has been reached.
For policies available directly through Choosi, cover is generally available for Australian residents aged between 18 and 59 (inclusive). 
If you smoke, you can still apply for cover but this may affect the amount you pay for your insurance premium. 
Yes, you may cancel your policy at any time.
When you buy a policy, you’re entitled to a cooling off period (generally 30 days), and as long as you cancel within this time, and a claim hasn’t been made, you’ll get a full refund of the premium that you paid. You may also cancel after the cooling off period, but usually, you won’t get a refund. If you’ve chosen an annual payment option, and cancel part way through the year, you may receive a refund equivalent to the unused portion of your payment.
Some policies offer an option to choose stepped or level premiums, but for policies available directly through Choosi, the premiums are stepped which means they will increase every year as you age. Your premium is re-calculated each year at your policy anniversary and is based on other factors like your smoking status at the time, your monthly cover amount, your waiting and benefit period, occupation, and if you engage in any risky activities. 

You may find you need income protection insurance if your income suddenly stopped due to sickness or injury, and:

  • you can’t pay your bills, living expenses, and other financial obligations like your mortgage;
  • you have dependents like children and/or a partner who rely on your income; or
  • you’re self-employed or a contractor, and don’t have access to paid sick or annual leave.

Each person's situation is different and you would have to investigate if this would be useful to your own personal circumstances.

If you’ve decided to look into getting a policy, here are a few things to consider: 

  • The type of policy: indemnity value vs. agreed value – an indemnity value policy insures you for a percentage of your income at the time of your claim. If your income has reduced since you bought your policy, your monthly income benefit will be calculated based on the lower income. The benefit of having this policy is that it’s typically a lower premium. An agreed value policy allows you to insure your income for a percentage of an agreed amount when you apply. It can be more expensive than an indemnity value policy but does suit those whose income fluctuates year on year. Policies available through Choosi offer an indemnity value policy, which allow you to insure up to 75% of your pre-tax income, capped at $10,000 per month.
  • The waiting period – for policies available directly through Choosi, a waiting period is a period you must wait that’s either 30 days or 90 days before you’re entitled to receive the monthly income benefit. When choosing a waiting period, consider how long you could continue to pay your financial obligations if your income stopped—do you have savings or access to paid sick or annual leave that could help while you’re waiting to make a claim? Also keep in mind that you’ll be paid in arrears, so a 30-day waiting period means you’ll actually be paid after 60 days (a 30-day waiting period plus another 30 days).
  • The benefit period – for policies available directly through Choosi, you can choose a period of 6 months, 1 year, 2 years or 5 years. How long do you want your payments to last? Keep in mind that whatever benefit period you choose, if you stopped being sick or injured before the benefit period ends, or if you’ve turned 65, that your income benefit payments will stop.
  • Stepped or level premiums – stepped premiums increase over time as you age, while level premiums stay the same for the entire period you hold your policy. Think about whether you’d prefer to pay lower premiums now, knowing they’ll increase as the years pass, or if you’d prefer paying higher premiums now, with the certainty that they’ll never increase. Policies available directly through Choosi offer stepped premiums only.
     

When you request a quote from us, we give you an indicative quote based on the basic details that you provide. Once you’re ready to apply for cover, we’ll ask some more detailed health and lifestyle questions to assess your risk factors. Depending on your answers to these questions, there may be certain aspects of your health and lifestyle that the insurer will add a premium loading to your original quoted price, due to being regarded a higher risk. 

As everyone’s situation is different, we need to take you through some health and lifestyle questions in order to provide you with a personalised quote.
You or your legal representative will need to call or write to your insurer (the contact details will be included in the Product Disclosure Statement of your policy). You’ll be sent a claim form to complete and return back to them, along with proof the insured event took place. Your insurer may also ask your doctor (if applicable) to fill out a form. If you want to make a claim on your policy, you should do so as soon as possible, ideally within 120 days of the insured event taking place. 

Important note:
The answers above are to be used as a reference guide only and don't substitute or replace your insurance contract, the Product Disclosure Statement (PDS) or Certificate of Insurance.

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