Income protection insurance is designed to provide you with adequate ongoing income in the event that you are unable to continue working either temporarily or permanently. It should reflect your level of income at the time of your claim.
But about 70 percent of all policies in Australia today offer no such guarantees simply because they are not financially endorsed, meaning that the insurable income is not proved and agreed by the insurer. This may leave the policy-holder with a considerably lower benefit than anticipated in the event of a claim. It may also mean the policy-holder is paying a premium based on an assumed benefit that, in fact, does not materialise.
The majority of our clients are business owners or are in professional or executive roles that involve variable personal exertion income. We always recommend our clients take out a financially endorsed policy. This means that the insured person provides financial evidence of income at the time of application, so that no further evidence will be required in the event of a claim. Thus, the premium is based on a known benefit. A policy that is not financially endorsed will almost certainly be reviewed in the event of a claim; the policy holder may find the benefit is considerably lower than anticipated.
The relatively small time cost involved at the beginning by preparing a financially endorsed policy can pay strong dividends in the medium and long term.
