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Coronavirus: Will income protection cover me?
Learn how income protection can help – whether you’ve already got coverage or you’re thinking about buying it.
The coronavirus (COVID-19) pandemic is putting thousands of jobs at risk. If you’re worried about being out of work for a while, either because you could fall sick or your business might be forced to close, income protection insurance could help.
How does income protection work?
Income protection insurance promises to pay a percentage of your typical wage if you ever become too sick or injured to work. For a monthly fee – usually around 1-2% of your salary – it gives you peace of mind that you’ll be able to pay the bills, even if your income suddenly stops.
It’s typically available to both employed and self-employed people, and some income protection policies will even let you add involuntary unemployment cover to your policy. That way, you’re not just covered in the event of illness or injury, you’re also covered if you’re made redundant.
Will income protection help if you catch COVID-19?
If you have income protection insurance, you should be able to claim on your policy if you catch COVID-19 and are out of work for a while. Even if you buy a policy today, it’s likely you’ll still be covered for COVID-19 if you catch the disease in a few weeks.
However, most income protection policies have a waiting period for illness, typically 14 to 30 days. This means you have to wait this length of time between when you stop working and when you can make a claim. You won’t receive any money during the waiting period, and it won’t be backdated.
Sometimes, you can customise your waiting period – the longer you make it, the lower your premiums will be.
What if you’re made redundant because of COVID-19?
If you have income protection insurance with redundancy cover, you may be able to claim in the event you lose your job or your business has to close because of the coronavirus.
However, redundancy cover has some key restrictions. First, you must serve a no-claim period. This is the length of time from when you buy your policy to when you become eligible for benefits. Typically, this is six months.
During this no-claim period, your employer cannot give any indication that redundancies or closures may occur, otherwise the redundancy cover is void.
There is also a waiting period. This is the length of time from when you lose your job to when you can claim benefits. Typically, the waiting period is 28 days.
That means if you bought your policy today, you would have to be safely employed for at least six months, with no indication that your employer is planning to make redundancies before your policy has value. If you were made redundant after those 6 months, you would have to be out of work for 28 days before you could lodge a claim for redundancy benefits.
Is it too late to get income protection insurance?
No. It’s never too late to get income protection insurance. Even if you don’t end up needing it due to the coronavirus (COVID-19) pandemic, it may come in useful at a later date. So if you’ve been thinking about getting income protection, there’s no harm in doing it now.
What are my other options for financial help during COVID-19?
Regardless of whether income protection insurance is right for you, there are several other ways you can seek financial support if you’ve been adversely impacted by the coronavirus pandemic.
If you’re worried about the prospect of unemployment, read our guide on how to prepare, so you’ll be in a stronger financial position if you do find yourself out of work.
If you’ve already lost your job, you may be able to access help through WINZ’s COVID-19 financial support and take a break from bills.