Many Australians purchase income protection insurance and think they are fully covered, only to find out that their policy only provided partial protection and that they don’t have enough to cover all of their expenses. While it’s great to compare policies, a lot of people look for the wrong things and end up making bad choices.
Here are some pitfalls of comparing insurance protection quotes.
Limited Payment Periods
If one is permanently disabled and can no longer produce income, they would expect to be paid for the rest of their lives. However, many policies cap payments to periods of one or two years. We won’t recommend any particular length here, but be sure that you know exactly how long you will be paid in the event that something terrible does happen to you and you can no longer work.
Note that payment is often capped depending upon occupation.
Payment Period Differentials
This is a partial version of limited payment periods. The company pays different lengths of time for different conditions. An example would be paying lifetime benefits on accidents but only two years on illness. If your policy has differentials, make sure that you know exactly what is defined as “illness” and what is defined as an “accident.”
Also, beware of “secondary disabilities” which are caused as a consequence of the original problem. This may not be included in your cover.
Non-Renewable Policies
Imagine paying premiums for years, only to be told you are no longer eligible for insurance. This can happen with some policies. Some plans are renewable and some are not. It is helpful to know the difference.
Non-Indexed Plans
Some plans are indexed to inflation, while some are not. Inflation has historically happened nearly every year; there is no reason to believe that it won’t continue to be an issue.
Limiting Definitions
Many policies limit the definition of disability by excluding those who can physically work in their profession but only on a part time basis. If your policy has an income-based definition, you can be compensated based on your ability to earn.
Call the Professionals
At Approved Financial Planners, we make sure that you know exactly what you are getting, no matter what cover you choose. Save the “surprises” for Christmas and birthdays. Call us today: (08) 6462 0888.
