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Income Protection vs Sickness & Accident

The two names generally mean the same thing, but when you are ’shopping around’ for insurance that will cover you if you are unable to work, you may be in for some surprises if you take the wrong one. This article will outline as simply as possible the differences to save you the dramas at claim time.

There are two different industries: Life Insurance and General Insurance. The easiest way to differentiate them is that General Insurers (GI’s) usually offer home and contents or public liability in their range of products. This isn’t always the rule because some insurers sit on both sides of the fence, but you’ll get the gist as this post goes on.

An Income Protection (IP) policy is offered through a Life Insurer, and a Sickness and Accident (S&A) Insurer is offered by a General Insurer. S&A insurance is a ‘yearly renewable’ contract. This means that the insurer renews your policy on a yearly basis, as long as you still fall into their required guidelines. If not, they reserve the right to cancel your policy.

An Income Protection insurance policy through a life insurer is a ‘guaranteed renewable’ contract, which means the insurer guarantees that they will reinsure you every year, as long as you keep paying the premium of course.

So, at face value based on this fact alone, it is more beneficial to take out an Income Protection policy instead of a Sickness & Accident policy. The other main concern when insured with a General Insurer through an S&A contract is that your premium is not guaranteed each year. Usually, your premium increases as you get older, due to statistics saying that you are more likely to have a claim. But an S&A policy will increase even further if the insurers pricing managers decide they need to cover their ‘rears’ a bit more this year. We’ve had people who have come to us after getting a 25% increase!

And lastly, at claim time, which is the all-important reason you are taking this out in the first place, the S&A contracts state that you must be ‘unable to perform ALL of your income producing duties’ to make a claim. IP policies state mostly that you be ‘unable to perform ONE of your income producing duties’ to receive a full claim. And you can even go back to work part time and get some form of benefit from your policy.

Why would anyone get an S&A policy? Because they aren’t told at the time of application. Usually, you just ring up one of the big companies and they do it all over the phone without any checks or paperwork. This is reason for concern in itself.

If you would like a no nonsense, independent quote, please contact one of our advisers on 1800 737 926 or click on the online quote request

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