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LPP vs Income Protection

Many people aren’t sure about the difference between Loan Protection Insurance and Income Protection Insurance. We explain each product below and how they differ, to help you consider what might work best for your situation.

What is Income Protection Insurance?

If you are unable to work due to injury or sickness, Income Protection Insurance provides a monthly benefit of up to 75% of your income until you are able to return to work, or for the maximum specified time period listed on your policy1 . The benefits could help to support common living expenses such as rent or mortgage repayments, childcare fees, and other regular bills.

It’s important to remember that you are not able to claim on Income Protection Insurance if you become involuntarily unemployed or lose your job2.

Income Protection Insurance is also only of benefit if you are working – but check the details of any policy you are considering so that their definition of ‘employment’ meets your situation and needs.

Waiting Periods

Typically, Income Protection Insurance will have a claim waiting period – the time you must be off work before you can make a claim. It’s often a 30 to 90-day timeframe, however, some policies can range up to 2 years. Generally, the shorter the claim waiting period, the more expensive the premiums.

Benefit Periods

At the time of taking out an income protection policy, you will select or agree on the benefit period – the length of time you will be paid a monthly benefit in the event of injury or illness. Benefit periods can range from several months to a number of years or until a specific age. Generally, the longer the benefit period, the more expensive your premium.

Where can you get Income Protection Insurance?

There are three avenues you could explore:

  1. Direct from an insurer
  2. Through a financial adviser
  3. Potentially through your super fund

How does an ALI Group Loan Protection Plan contrast?

ALI’s Loan Protection Plan provides a lump sum benefit if you are diagnosed with a terminal illness or pass away or suffer one of eleven serious medical conditions (including cancer, heart attack or stroke), and up to three monthly benefits if you involuntarily lose your job (with only a 30-day waiting period)3.  It also offers optional accidental injury cover which provides up to three months benefits if you can’t work due to illness or injury (also with only a 30-day waiting period).

Loan Protection Plan doesn’t require extensive medical tests or examinations to assess your health risk, so the application process is simple, and your cover can be established quickly and easily.

Another significant difference is that you have the option to cover your partner, giving you both the comfort of knowing you have protection in place3.  ALI Group’s Loan Protection Insurance has helped thousands of Australians and their families through extremely challenging life events. 

To learn how we could help you protect your financial future or for further information on loan protection versus income protection, have a look at the summary video below.

 

 

Alternatively, if you’re in the home-buying or refinancing process, and are ready talk to your local mortgage broker, click here to find your nearest ALI-authorised broker or request a quote here.

 

 

1 https://www.moneysmart.gov.au/insurance/life-insurance/income-protection
2 https://www.finder.com.au/loss-of-job-insurance
3 https://www.aligroup.com.au/existing-customers/policy-documents (refer to PDS)


Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.