Does income protection insurance cover me for coronavirus?
The impact of COVID-19 has put thousands of Aussie jobs at risk. Unemployment rates are set to skyrocket over the coming weeks and months as businesses shut down across the country.
Those with income protection insurance are now questioning whether they'll be covered if they get sick or lose their job during the pandemic, and those without are scrambling to find out if they can take it out now and still be covered. The short answer is, it depends.
Below, we'll cover off some of the key questions around income protection and COVID-19 to help you navigate the situation.
Will income protection cover me for coronavirus?
If you end up sick with coronavirus you may be covered under income protection - but only if you're off work for a longer period of time.
For instance, you might require an extended hospital stay that is longer than what your annual leave allows for.
Will I need to serve a waiting period?
Most policies require you to serve a waiting period for illness. This means you'll need to wait a set period of time between when you stop working and when you can lodge a claim. You won't receive any payment during this time and it won't be backdated either. Waiting periods are typically between 14 and 30 days.
Depending on your insurer, you may have the option to customise your waiting periods. The longer you set them, the lower your premium will be.
What if I'm made redundant because of COVID-19?
Your income protection policy may cover you for redundancy, provided it includes redundancy cover. This is an optional extra on many policies and isn't automatically included.
Redundancy cover also includes strict limitations. For example, you'll typically need to serve a six-month no-claim period before you can begin to receive benefits. During this time, your employer can't give you any indication that a redundancy may be on the cards or it will void your cover. You'll also need to serve a waiting period of 28 days between when you lose your job and when you can lodge a claim. The maximum amount of time you can claim for is three months.
How do I know if I have income protection?
Unsure if you're covered? You're not alone. Around 38% of Aussies are either unsure if they have income protection or don't know what they are covered for.
A good idea is to check your super. Income protection is usually included if your balance is greater than $6000. You can find out by logging into your online portal or contacting your super fund.
Is it too late to take out a policy and still be covered for COVID-19?
It isn't guaranteed that you'll be covered for COVID-19 if you get income protection today. Even though we're in the midst of a pandemic, new client applications will be treated as normal, and you'll still need to adhere to the waiting periods.
But it isn't too late to be covered for the future. Even if you don't end up needing to use your cover during the pandemic, your income protection policy may come in handy down the track. It's also a good idea if you don't know if you have income protection in place and what the details to take this time to read the fine print and future-proof your savings.
How else can I be covered for the pandemic if I get sick or lose work?
The government has pledged economic support worth $189 billion. As part of this, pensioners, benefit recipients, apprentices and small businesses will benefit from cash handouts and tax relief.
The government has announced it will be supplementing Newstart payments by an additional $550 per fortnight for the next six months. This will apply to both existing and new recipients of the payment. Sole traders or those who are self-employed can also access the payment if their income is affected by the pandemic.
The possibility of being unable to work is never comfortable, but it's important to be informed about your options in the rare event that you do need financial assistance.
We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.