Liability Insurance :: Articles
SHARE

Share this article!

Loss of income insurance: Case Study

Loss of income insurance: Case Study

Rebecca is a single, self-employed graphic designer who works from home.
Aged in her mid-30s, she has monthly commitments of a mortgage and car payments and the usual living expenses.

She gave little thought to protecting her income against illness or injury until a friend recently was diagnosed with breast cancer and was unable to continue working.

Fortunately, her friend had taken out income protection insurance. Six months down the track, she is still receiving a regular payment which is helping her and her family to meet the cost of her medical expenses and a mortgage.

This episode made Rebecca rethink her own circumstances. Once her savings ran out, how would she cover her mortgage? And her car payments?

Who would pay for her food and utilities? And any medical bills that were not covered by her private health fund or Medicare?

Insuring your most valuable asset
While many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.

Rebecca contacted an insurance broker, requesting several quotes on a policy that would pay up to 75 per cent of her average gross monthly income.

To make the premium more affordable, she elected to have a longer waiting period of three months before the payment took effect because she would have enough in the kitty to cover her costs during those first few months.

The broker informed her that she would actually have to wait a further 30 days before her payment kicked in because she would be paid a month in arrears.

Rebecca crunched the numbers again and found she couldn't string out her finances for an extra month so opted instead for a 60-day waiting period.

The broker then asked about her age, her health, whether she was a smoker, her occupation and the length of time she wished to be insured. Rebecca elected to be covered until the age of 65 and stressed that the policy must be guaranteed renewable; that is, once she took it out, it would be renewed every year regardless of her health.

She also asked that consumer price index increases be factored in.

One of the key features of an income protection policy is a total disability benefit. Examine the definition of this benefit closely to ensure it matches the cover you require.

There are also two distinct types of policies: agreed value, where the amount of cover agreed to in your application is guaranteed for the life of the policy; and an indemnity contract, where the benefit to be paid is determined at claim time and is based on your level of income at that time.

If Rebecca were in a relationship, she might not need income protection insurance, particularly if her partner was not dependent on her income.

However, if you are self-employed and single with no sick leave or are in a relationship where your income is essential to meet commitments, then income protection is definitely worth considering.

Most insurance companies will have application forms that will ask about your medical history. Most will ask permission to contact your doctor to confirm your details.

If there are any issues, you may be required to have a medical. If you have a particular problem, the policy can exclude claims for that condition.

Within an hour, Rebecca's broker had provided several different quotes. She opted for a tax-deductible premium of $1466 a year. In the event of a claim, she would receive $3125 a month, enough to cover her mortgage and her bills until she could return to work again.

Published:Sunday, 1st Aug 2021
Author: 2

Share this article:

Car Loans - Quick & Easy
If you are in the market for a new or used car, then we'd like to help you arrange the money. Our car loan & leasing service is backed by a national panel of car loan specialists who will establish your eligibility, find lender/s offering the best deals for your situation - and help you through the approval and settlement process. No charge to you - and no obligation to proceed with any recommendations offered.
Need Money for a Bike?
We offer fast, free, easy access to the best Bike Loan rates and options in the Australian market. Simply use our 3-minute Bike Loan enquiry form to see if you qualify … and you'll get instant access to our national specialist Bike Loan broker network for free advice and assistance through the approval process. No charge, no obligation!

Business Insurance Articles

How to Assess Your Risk Exposure and Select the Right Indemnity Coverage How to Assess Your Risk Exposure and Select the Right Indemnity Coverage
Professional indemnity insurance stands as a pivotal safeguard for Australian professionals navigating the intricacies of liability in their work life. This form of insurance is designed to protect professionals against legal costs and claims for damages arising from acts, omissions, or breaches of professional duty in the course of their practice. Whether it's due to an honest mistake or an unforeseen error, the ramifications of such professional oversights can be financially crippling. - read more
The Impact of Environmental Liability on Australian Business Operations The Impact of Environmental Liability on Australian Business Operations
In today's ever-evolving business landscape, the significance of environmental sustainability and legal accountability is increasingly paramount. Australian enterprises, in particular, are encountering a growing need to understand and manage environmental liability. This reality not only influences corporate image but also carries substantial financial and legal ramifications. - read more
Critical Risk Management Strategies for Every Australian Tradesman Critical Risk Management Strategies for Every Australian Tradesman
Welcome to the crucial world of risk management for Australian tradesmen. Whether you're a seasoned professional or just starting, understanding and mitigating the inherent risks in the trades industry is paramount to both the safety and sustainability of your business. This article intends to guide you through the world of risk management, emphasizing the pivotal role of liability insurance. - read more
Understanding Product Liability Insurance in Australia: A Business Owner's Guide Understanding Product Liability Insurance in Australia: A Business Owner's Guide
As a business owner in Australia, navigating the complexities of protecting your company is crucial, with product liability insurance being an essential aspect to consider. This type of insurance is designed to shield businesses from financial losses that may arise if a product they manufacture, supply, or sell causes harm to a consumer or damages property. - read more

Insurance News

Insurers Bet Big on AI for Streamlining Claim Resolutions Insurers Bet Big on AI for Streamlining Claim Resolutions
28 Mar 2024: .Paige Estritori

Australia's insurance sector is witnessing a transformative embrace of artificial intelligence (AI), with a sweeping 90% leaning on, or on the cusp of adopting, chatbots and advanced AI to enhance claim handling, as noted in Gallagher Bassett's yearly analysis. This heightened integration reflects the sector's aim to bolster operational speed and efficacy, with a remarkable 98% of insurers predicting immense benefits from such advancements. - read more
Spike in Weather-Related Insurance Claims During Summer Revealed Spike in Weather-Related Insurance Claims During Summer Revealed
27 Mar 2024: .Paige Estritori

Over the recent summer period, NRMA Insurance reported an influx of claims linked to severe weather, with a record not seen since the autumnal months of 2022. An overwhelming number of these, about 85%, have been ascribed to weather disturbances such as storms and hail, per the updated Wild Weather Tracker statistics. - read more
Federal Court Upholds Insurer's Policy Update Clause Federal Court Upholds Insurer's Policy Update Clause
26 Mar 2024: .Paige Estritori

The Federal Court has provided a green light to Auto & General’s home and contents insurance policy terms, confirming the necessity for policyholders to inform the insurer about significant changes affecting their coverage. The company emerged victorious in a legal scrutiny instigated by regulatory body ASIC over the disputed clauses. - read more
Survey Reveals Time Crunch for Brokers Facing Compliance Hurdles Survey Reveals Time Crunch for Brokers Facing Compliance Hurdles
25 Mar 2024: .Paige Estritori

Steeped in administrative duties, brokers are dedicating over three hours daily to data processing tasks, finds a survey issued by an insurance software company. Further intensifying their plight, nearly one-fifth have reported growing complications and time expenditure in compliance adherence, underlining a pressing industry conundrum. - read more

Start Here
Your free liability insurance quote comparison starts here!

Cover Amount:
Postcode:
All public liability quotes are supplied to you free and without any obligation. We respect your privacy.

Knowledgebase
Insurance Claim:
Notification to an insurance company requesting payment of an amount due under the terms of the policy.