Becoming seriously ill or injured could easily prevent you from maintaining the lifestyle that your family enjoys today. Income protection insurance is designed to replace a significant portion of the income you lose if you cannot work due to sickness or injuries. Monthly payments are made to help you remain financial stable so you do not have to lose all your assets following unforeseen events. However, it is critical to know what your income insurance policy actually covers. One of the common questions asked concerning this type of policy is “Do I get income protection if I lose my job?”
Losing your job
Every income protection insurance policy is different and you need to carefully read through the fine print before buying a particular policy. In most cases, you will not receive any benefits through income protection insurance in case you lose your job. There are two main areas that are covered under this type of insurance: injury and illness. In order to receive your benefits, you would have to be prevented from working as a direct result of injury or illness. Losing your job or going through redundancy does not qualify for income protection in Australia.
Why is job loss not covered?
One of the reasons why Australian insurance providers do not provide protection against job loss is that it has the potential of creating mass claims that the insurers could not afford. However, a few income protection policies offer unemployment continuation benefits such as waiving your premium for a set period if you become unemployed. Your insurance provider may also have an unemployment cover benefit program that provides a monthly benefit so you can cover any loan repayments or necessary expenses click here for more info.
Are there any alternative benefits?
Although many policies do not provide a benefit payment if you have been made redundant, you can have your premiums waived if you become involuntarily unemployed. Some of the instances in which your premiums can be waived include leaving work due to your role as a caregiver, if you take a sabbatical, maternity leave or paternity leave. Premium waivers provided due to involuntary unemployment are available for a limited period, usually 6 months, and you are required to present evidence that you are seeking employment.
You could also get unemployment benefits – the provider pays your minimum mortgage repayment if you are involuntarily unemployed. Such a payment is only provided for a set period and in most cases, you can only get this benefit if you take out your income protection insurance and mortgage loan from the same provider.
Although income protection insurance may not provide cover against becoming redundant or losing your job, getting protection against the inability to work from sickness or injury is still critical. Note that if you become redundant, it could be easier to find a new job than if you suffered a debilitating illness or injury. However, it is also important to compare different income protection policies before making any commitment. You should also speak to your financial planner to fully understand what you get covered for when you buy income protection insurance.