Help – I need to make an income protection claim

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Hi Tash, I’m a teacher (permanently employed) and have recently been diagnosed with cancer. I’ve been put on sick leave for seven months and have enough paid sick leave to last four months. I’m using my paid sick leave to cover the initial 60 day waiting period before my income protection insurance kicks in, but I’m wondering whether I should then switch over to using my income protection cover and save the rest of my sick leave? I don’t know how my illness is going to play out, although I have been given a fairly good long-term prognosis. Any suggestions?

First of all, I’m so sorry to hear about your diagnosis and I truly hope that you recover from this soon. As far as your insurance goes, your starting point should be to contact your insurance provider (or super fund, depending on where your income protection is held) to find out the terms of your cover as not all policies are the same. You need to find out things like:

Is any underwriting required and what is the process?

If your provider did not medically assess your application when you obtained the cover (which is often the case with cover held inside super or seen advertised on TV), you will need to go through a process where they assess whether or not you had a pre-existing condition, or any symptoms before the cover was taken out. This will determine whether they will honour your claim. And the process can often take longer than your waiting period.

How soon is your claim paid once the waiting period has passed?

Assuming they will pay your claim, that is. Some insurers pay monthly so you could be waiting an additional month beyond your waiting period before you actually receive a payment.

What are the terms of your cover?

  • Benefit period – Find out how long this is. If it’s cover inside super this typically only pays you for a maximum of two years.
  • Waiting period –It’s important to know whether the waiting period starts again if you return to work for any amount of time. Some policies allow you to be on and off work.
  • Determining your payment – This can be calculated differently across different policies. They may take the average of your last 12 months of income, or the best of the last three years, or use another formula. Don’t assume that you will get paid at the rate of your current salary.
  • Sick leave – Find out if you’re able to receive sick leave and income protection payments at the same time. You may also be required to first use up ALL your sick leave before your policy will start to pay.

Other important considerations

Another very important distinction is that your sick leave would be paid at 100% of your salary, however income protection only pays up to 75% of your salary. You also pay income tax on income received from an income protection policy. Once you better understand the terms of your cover – what you are and aren’t covered for, how the claim process works, how long you can receive benefits for, and how much you’ll receive – you’ll be in a better position to decide on the best way forward. I hope that helps and best of luck with your treatment.

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