Income protection waiting periods – what you need to know

How do waiting periods for income protection work?

The waiting period for an income protection policy is the amount of time that must pass before you can start receiving income protection benefits. This starts the moment you make a claim for an injury or sickness, and during this time, you won't be able to work or receive an income. If you happen to recover and return to work during this time, you might no longer qualify to receive your benefits.

When you sign up for an income protection policy, you'll be given a choice of a few different waiting periods. These typically range between 14 to 90 days, but in some cases, can be as long as a few years. Generally, the longer you choose to wait, the cheaper your policy gets, and the shorter your waiting period is, the more expensive it is.

It's important to note, your income protection benefits don't get paid out immediately after your waiting period ends. Rather, this is when the benefits start accruing and the first payment is typically made in another month from that date. There's more information about this further down.

You might find that larger insurers that can take on more risk will offer shorter waiting periods, while there may be less flexibility with smaller providers.

How do waiting periods affect the cost of an income protection policy?

As a general rule, the longer the waiting period, the cheaper an income protection policy will be. Insurers do this because waiting periods exist as a way for insurers to manage risk with income protection policies. For example, with a 90 day waiting period, there's a chance that you'll recover in this time and return to work. This makes you ineligible to claim, thus reducing the insurer's risk of having to pay a claim. So, with a longer waiting period, you won't be able to get your income protection payments quickly, but your policy will come with cheaper premiums.

Having a cheaper policy isn't all sunshine and rainbows, however. While your benefit payments start accruing after your waiting period ends, they'll follow your insurer's pay schedule. If you had a policy with a 90 day waiting period and your insurer has a monthly pay cycle, you could find yourself waiting up to 120 days before getting your first payment.

Does income protection get backdated?

Yes, only to the end of your waiting period. Insurers typically make monthly payments in arrears, which simply means you get paid at the end of each month for the previous month's coverage. This is why your first payment covers the time right after your waiting period ends.

The table below shows how your first payment works following the end of your waiting period.

Claim event	Dates	Number of days since claim
Date you make a claim (30 day waiting period begins)	1 June.	0 days
Waiting period end date (Start accruing monthly benefit)	1 July	30 days
First payment received after 30 more days	1 August	60 days

Can I get income protection insurance with no waiting periods?

Generally, no. Most insurers have waiting periods in place to prevent people from taking out a policy when they become sick, injured, or ill. All the policies we've found only offer income protection cover with a waiting period, and this appears to be the industry standard.

What to consider when choosing your waiting period

Before deciding on a waiting period for your income protection insurance, you should think about whether or not you'll be able to make ends meet during this time. Some important things to consider include:

• What's the status of your employment? If you're employed full-time or part-time, do you have any remaining paid or sick leave? If you have more paid time off, you might consider opting for longer waiting periods. On the other hand, are you a casual employee? How long could you manage without an income?
• Can your spouse or partner's income cover immediate expenses? If your spouse or partner earns enough to cover household expenses, you might be able to manage a longer waiting period and get a lower premium. If their income isn't enough, a shorter waiting period might be necessary to bridge the financial gap.
• Are your savings or investments enough to draw from? Think about how much you have saved up or what you can free up from investments. Is it substantial? Then maybe a longer waiting period is a better option to potentially reduce your premium.
• Do you have any other insurance policies that might provide overlapping cover during the waiting period? Check for any other policies you might have that could give you cover. If you have trauma or accidental injury cover, you might be able to make a claim for the same injury or illness that applies to your income protection policy. This can make a longer waiting period a lot more manageable.
• Will you be able to lean on any family support during the waiting period? Will your family or relatives be able to provide a financial cushion while you wait for your benefits? If it isn't an option, a shorter waiting period might be needed to prevent financial strain.
• Are you entitled to work compensation for your injury or illness? If you qualify, you might receive some additional financial help during the waiting period. This could allow you to opt for longer waiting periods. Without this, a shorter period might be more practical.
• Do you have salary continuance insurance? If yes, what's your benefit period? The standard salary continuance policies cover up to 2 years of disability or injury income protection. This can make a longer income protection waiting period, like 1 or 2 years, a lot more feasible, as you'll be able to fill the immediate financial gaps with another policy.

What's the difference between a waiting period and a benefit period?

The waiting period is the time you wait before you start accruing benefits.

The benefit period is how long you'll receive payments once they start.

Waiting periods are generally a set amount of time, lasting as short as 14 days to as long as several years, depending on your policy. In comparison, the benefit period can last for a fixed number of years or until a specific age, such as 65.

Picking the right mix of waiting and benefit periods is key to ensuring that your income protection policy fits your budget and coverage needs. Sometimes, it can be as simple as a conversation with your insurer or comparing the different options available.

FAQs

• When will I get paid from my income protection policy?

  You'll start accruing benefit payments after your waiting period is over and then you'll start receiving payments in accordance with your insurer's pay cycle.

  Most insurers pay in arrears monthly, so you'll typically expect to receive your first payment a month after your waiting period ends.

• How much will my monthly income protection benefit be?

  It depends on the sum insured amount or "benefit" amount in your policy. This is usually up to a percentage of your income, with most policies we've seen covering up to 70% or 75%.

  Generally, the higher your benefit is, the higher you'll be paying for your premiums.

• How do I know what my income protection waiting period is?

  When you sign up for a policy, you'll typically be able to choose from a range of set waiting periods. This will stay on your policy unless you make changes to it in the future. You can always check your income protection policy documents or contact your insurer directly if you're unsure.

• Can I change my waiting period later on?

  This will depend on the policy you choose. Most insurers will let you adjust your policy at later stages, such as adjusting the payment structure or increasing or reducing the level of cover.

  If your policy allows you to change your waiting period after you're covered, your premiums will be affected. For example, if you reduce your waiting period from 30 to 14 days, your premiums will increase. However, if you increase your waiting period, your premiums will most likely come down. Make sure that you won't be charged by your insurer for simply changing your policy waiting period.

• Can I return to work during my waiting period?

  If you happen to return to work during your waiting period, you'll be ineligible to receive your benefits with many policies. However, some providers will only need you to meet a minimum number of days in your waiting period not working to qualify for a payment.

• Can I return to work during my benefit period?

  The agreed benefit sum and period will only apply as long as you're considered unable to work. If you go back to work before it ends and start receiving some income again, most income protection policies will pay you a partial disability benefit instead. These are smaller amounts that are designed to top up any gaps in your regular income until you return to your full capacity.