Income protection benefits are sometimes also referred to as salary continuance benefits. They are, as their names suggest, benefits that protect income if a person is unable to work due to illness or injury.
As with Total and Permanent Disability (“TPD”) benefits, income protection benefits can be held in superannuation accounts or they can be outside of superannuation in private insurance.
All income protection benefits are different.
In general terms, income protection benefits are usually paid as a monthly benefit which is 75% of the insured person’s pre-disability income capped at some amount. Sometimes benefits might be an agreed amount and not worked out based on an individual’s pre-disability income.
Claiming income protection benefits can be confusing. In this blog, we’re addressing some frequently asked questions about income protection claims and benefits.
What is a wait period?
It is rare that income protection payments start right after a person stops working. There is usually some delay before the payments start.
This delay is called the wait period.
The amount of time that must pass varies from policy to policy. In most cases, it is either 30, 60 or 90 days. Ordinarily, the shorter the wait period, the more expensive the insurance.
How am I supposed to support myself during the wait period?
This can be tough for many people. Sometimes people rely on employment-related entitlements like sick leave, long service leave or annual leave. Other times, people can claim Centrelink entitlements which can help them financially while they wait for the wait period to expire.
It’s important to note that in most cases, payments will not start as soon as the wait period ends. This is because the claim may still be getting assessed during this time and beyond.
Payments often do not start until the insurer assesses and accepts the claim.
How long will my income protection benefits be paid for?
The time that benefits continue to be paid for (the benefit period) varies from policy to policy. The benefit period can be 2 years, 5 years, until 60, 65 or 70 years old. Ordinarily, the longer the benefit period, the more expensive the insurance is.
Can income protection benefits continue to be paid after I return to work?
A return to work doing all pre-disability duties, for the same pay and without restrictions usually means that payments will stop. However, if the return to work is in a reduced role and at a reduced rate of pay, a partial disability benefit might still be paid in some circumstances.
Can more than one income protection benefit be paid at a time?
Most policies allow for payments of up to 75% of pre-disability income capped at a certain amount.
If a person has more than one income protection policy and the payments under policy #1 are less than 75% of their pre-disability income, it may be possible to claim on policy #2 up to the 75% payment limit.
If I claim a TPD benefit will my income protection benefits stop being paid?
Some policies state that income protection benefits will cease if a TPD benefit is paid, but this is not common.
Does claiming compensation under a statutory scheme impact on income protection benefits?
Each state and territory has different state-based compensation schemes and there are a number of different benefits which are unique to each scheme. The types of schemes could be for workers compensation injuries or motor vehicle accident injuries.
Each income protection benefit varies in the way that it interacts with the various compensation schemes and their respective benefits.
As a rule, if the compensation received from a state or commonwealth scheme is compensation for loss of income, it is likely to impact income protection benefits.
As you can see, there are some grey areas in and around income protection.
At Berrill & Watson, we’re experts in all things “income protection and TPD claims”. If you’ve got a query about your claim, feel free to get in touch directly with today’s blog writer, Tom Cobban.