Income Protection Cover: Varying Degrees of Disability

Australian insurance companies provide income protection cover for temporary as well as permanent disability. You will be considered disabled, if you suffer a reduction in earnings of 20% or higher. Then you will be eligible for cover until you return to work.

Disability Insurance

Disability insurance is another name for income protection insurance and is generally a part of life insurance which provides you with enough financial support in the event of an illness or injury. Sometimes you might come across a situation where you can't work for the rest of your life. In such cases, you will receive your insurance in the form of disability insurance.

Degrees of Disability

If you have income protection insurance, you are entitled to receive the cover in three different ways - permanent disability only, temporary or permanent disability, and total and permanent disability. Any of these options can be chosen when you first apply for the insurance. If you chose the first, you will receive payouts only when you are permanently disabled and it will continue up to the age of 65 years. With temporary disability, you will still get monthly payments, but it will be only for a short period of time, say one or two years. The total and permanent disability allows you a lump sum payment. The only difference is that you will get a lump sum payment instead of monthly payouts which can be used to cover the medical expenses, pay bills, and even make an investment. This way you can plan for your future and get income to maintain your lifestyle.
Premiums for each category will also differ and is determined by your age, sex, smoking history, general health, occupation, how long you are prepared to wait for your first payment, and the type of insurance you want to chose (temporary or permanent). For instance, people with a smoking history and those who work in industries that are prone to accidents and injuries will need to pay a higher premium compared to others of the same age and sex.

TPD Insurance Payouts

Total and permanent disability (TPD) insurance often will pay you up to 75% of your annual earnings. However, the duration of payouts will depend on the amount of premium you are willing to pay. You can also choose from agreed value or indemnity options. The latter option is much cheaper, but the payouts will be based on your earnings at the time you make a claim. Whichever income protection cover you choose, it will enable you to lead a normal lifestyle even when you suffer from temporary or permanent disability.

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