When someone asks me about the best income protection policy, I tell them something that usually surprises them.
The policy you need is probably from an insurer you’ve never heard of.
Australia’s life insurance market operates across three distinct channels: Direct, Retail, and Wholesale. Most Australians only know about the Direct market because that’s where the TV ads live.
But here’s what the data shows. Advised policies have a 95.2% claims acceptance rate. Direct policies consistently fall below that.
The policies you’ve never heard of are often better. And sometimes cheaper.
The Day 1 Partial Disability Trap
There’s one policy definition I focus on more than any other: Day 1 Partial Disability wording.
Here’s how it catches people. You’re recovering from an injury and want to return to work part-time. Your doctor agrees. You feel ready.
But some policies require you to be totally disabled for 7 or 14 consecutive days before they’ll pay partial disability benefits.
If you return to work too early, even in a limited capacity, you don’t meet the eligibility criteria.
The insurers I typically recommend don’t have this requirement. Or they only require one day, which is far easier to satisfy.
This matters most in claims where the transition back to work is critical.
The Own Occupation Question
Most Australians don’t know about the own occupation definition on TPD cover.
Own occupation means you’re covered if you can’t work in your specific profession. Any occupation means you need to be unable to work in any suitable role based on your training, skills, and experience.
Think about a surgeon who can’t operate anymore. Under any occupation coverage, the insurer could reasonably prove they can still teach or consult.
The cost difference? About one-third more in premiums.
For that level of certainty in a severe disability situation, it’s worth it.
The Coverage Math Nobody Checks
Income protection indemnity contracts pay a maximum of 70% of your income, up to your insured amount.
I see this problem constantly. Someone is insured for $8,000 a month, but 70% of their salary is only $6,500.
They’re paying premiums for $1,500 in coverage they can never claim.
Three Questions That Matter
When clients come to me, I ask three things:
What insurer are they with? I know the pitfalls once they mention the name. If it’s insurance inside a super fund, there are definitely improvements to be made.
What’s their waiting period and benefit period? I see way too many 2-year benefits instead of benefits to age 65.
How much coverage do they have? With indemnity contracts, many are paying for phantom coverage they can’t access.
These questions reveal more than any premium comparison ever will.
The Marketing Imbalance
Marketing is limited in the retail space but prominent in the direct market. Yet retail policies are considerably better.
Sometimes they’re even cheaper.
The policies most Australians never hear about often provide superior coverage at competitive rates. But insurers don’t sell them directly to customers. They work through financial advisers who understand the policy definitions and can match coverage to individual circumstances.
Different insurers have different niche customers and price accordingly. They tell advisers this information directly.
Customers shopping online never see it.
The best income protection policy isn’t the one with the lowest premium or the catchiest ad. It’s the one with definitions that actually protect you when you need it most.
That usually means looking beyond the market you can see.
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