Income protection insurance covers you for up to 70% of your earnings if you’re temporarily unable to work due to illness or injury and you’ve served your chosen waiting period (benefits are not paid during any waiting period. These temporary disability benefits may help you pay your bills, keep your household running, and may alleviate financial stress while you recover.
When you make a claim for income protection, it’s helpful to have the right information and a clear understanding of the steps, so it can be considered by your insurer as quickly and easily as possible.
Understanding the claim process
Before you lodge a claim, it’s a good idea to go through your Product Disclosure Statement (PDS) and relevant documents relating to your policy. These documents will outline what’s covered in your policy and if any conditions must be met for you to make a claim.
To get your income protection insurance claim started, the first thing to do is let your insurance company or financial adviser know as soon as possible. Alternatively, for cover through employers or super funds, contact them and they’ll point you in the right direction.
You’ll need to fill in a claims form and give personal, medical and financial details. You’ll also need to supply some supporting documents.
What type of documents will I be asked for?
The documents you’ll need to supply could be a combination of:
- medical documents such as reports and test results from your healthcare provider,
- an outline of your job responsibilities, physical demands and weekly working hours, and/or
- tax returns and pay slips, or financial statements if you're self-employed.
How long does it take to assess a claim?
Because everyone’s situation is different, the length of time it may take to assess your claim depends on a few things, including:
- the complexity of your claim,
- the amount of information that must be reviewed as part of your claim, and
- how quickly you provide the required information.
Each insurer is obligated to adhere to the Life Code of Practice timeframe industry standards.
What is Benefit Period?
The Benefit Period is the maximum period of time you nominated to receive your income protection payments for if you claim. The Benefit Period starts at the end of the Waiting Period. Depending on the insurer, Benefit Periods could range from 1 year up to until the age of 65, or in some cases, 70. Typically, the shorter the Benefit Period you’ve chosen on your policy, the lower your premiums will be.
What is Waiting Period?
The Waiting Period is the length of time you’ll need to wait after suffering the illness or injury that made you unable to work before you can start receiving your income protection benefit payments. Depending on the insurer, Waiting Periods could range from 2 weeks to 2 years. Typically, the longer the Waiting Period you’ve chosen, the lower your premiums will be.
When choosing your Waiting Period, people tend to consider how long they could go without receiving an income, such as how much annual or sick leave you have or if you have some emergency savings in place to tide you over until the benefit payments commence. You may also want to look into other potential temporary relief, like salary continuance if your employer offers it.
Examining common pitfalls in claim submissions
There are some common mistakes people sometimes make that can extend the claims process and, in some cases, lead to a rejection of the claim. It’s important to consider the below when submitting a claim:
- Incomplete or incorrectly filled out claim forms: Always double-check your forms for accuracy and completeness.
- Failure to submit required documentation: Whether it's medical reports, proof of income, or other supporting evidence, missing documents may delay your claim.
- Forgetting the Waiting Period: Some people mistakenly believe their benefits will start immediately after filing a claim, causing them financial strain.
- Not understanding policy exclusions: Overlooking the terms and conditions about what is not covered could result in a denied claim. Make sure you understand your policy's limitations and exclusions. If you are not sure if you are covered, always feel free to check with your insurer.
- Neglecting to provide ongoing medical evidence: For long-term claims, you'll need to regularly update your medical information to avoid losing your benefits so long as you remain unable to work due to sickness or illness in accordance with the policy terms.
- Overlooking the Benefit Period: Not understanding how long you're eligible for payments can be detrimental, especially if you're planning your finances around it.
- Non-disclosure of pre-existing conditions: If you fail to disclose pre-existing conditions your insurer asks you to answer during the application process, your claim could be impacted and may result in a claim being denied depending on the situation.
- Misrepresenting income: Your benefits are often calculated as a percentage of your income immediately prior to the disability occurring. Incorrectly reporting your income can result in reduced benefits or claim denial.
- Failing to follow doctor’s orders: Not adhering to medical advice and treatment plans may give the insurance company grounds for denying your claim.
- Misunderstanding benefit amount: It’s important to understand that the benefit amount at claim time is generally the lesser of your Benefit Amount and a percentage of your income immediately prior the disability occurring.
Understanding policy exclusions and limitations
There are some exclusions and limitations that apply to most income protection policies and affect whether an insurer will pay a claim, as well as how much they will pay.
While each policy differs, income protection benefits may not be paid if the event giving rise to the claim is caused directly or indirectly by:
- Attempted suicide or intentional self-harm
- Uncomplicated pregnancy, miscarriage or childbirth
- Acts of war
- Active military service in the armed forces of any country
- The influence or misuse of drugs
- Criminal acts or incarceration due to said acts
- Voluntary elective surgery the first 6 months
- Deregistration, disqualification or restriction that prevents you from performing your occupation
Inability to work that is not caused by sickness or injury
Certain limitations may apply to an income protection policy, such as:
- Travel outside your country: The insurer may require you to return to Australia to continue your claim after a certain period of time.
- Partial disability: If you’re able to work in some capacity, and therefore aren’t suffering a total disability, you may only be eligible for partial benefit payments.
- Occupational limits: Some high-risk professions might only be eligible for reduced coverage or higher premiums.
- Coordinated benefits: If you're receiving other forms of compensation, such as Workers’ Compensation, your income protection benefits may be reduced.
Understanding how to make an income protection claim can save you time and worry. Each insurer offers complaints processes (that are free of charge) to help you through any disputes that may arise at claim time. You can also seek legal advice if you require further assistance.
If you’re shopping around for your income protection and want a clear idea of some options out there with inclusions, exclusions and limitations before you buy, try our quick comparison tool. You can easily compare some of Australia’s top insurers in seconds and find a policy that works for you.