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Income Protection and Redundancy or Unemployment

Will I be paid by my income protection policy if I am made unemployed?

Very few income protection policies will pay you a benefit if you are made redundant.  This is because income protection insurance is primarily intended to cover you against sickness or accident affecting your ability to earn an income.  

However there are two insurers compared by Insurance Watch who offer a limited unemployment benefit:

  • Redundancy insurance protectionOnePath OneCare Income Secure policies – after 30 days of involuntary unemployment your ANZ minimum loan repayments of up to $5000 per month may be paid for up to 3 months
  • CommInsure Income Care policies – after 60 days of involuntary unemployment your CBA minimum loan repayments up to your monthly benefit amount may be paid for up to 3 months

If you have one of these policies but do not have a loan with the specified bank you will not be eligible to receive a payment.  Other conditions and eligibility criteria apply.  

Find out more about these income protection policies using Compare Quotes.

Alternative redundancy cover

If you are taking out Life and/or TPD insurance, AIA currently offer an add-on option to provide home loan payment relief if you are made redundant. The AIA Repayment Relief option will pay your minimum home loan repayment for up to 90 days should you find yourself involuntarily unemployed.

Find out more about the Repayment Relief option

How will being unemployed affect my income protection policy?

Your premium may be waived

Some policies will waive the premium on your income protection policy for a period of time while you are unemployed.  If your policy has this feature you may need to provide evidence of your unemployment to have your premium waived.

You may be able to suspend your policy

Some policies offer the option to suspend your policy if you are unemployed or suffering financial hardship.  Usually this means that you will not be able to claim during the period that the policy is suspended.  But it does make reinstating your policy once you are employed again easier.

Your cover may change from Own occupation to Any Occupation

If you have an “Own occupation” income protection policy then your inability to work will be measured against your regular occupation prior to suffering the illness or injury.  However if you have been unemployed for a prolonged period your regular occupation may be difficult to determine.  Therefore most income protection policies will change from “Own occupation” to “Any occupation” after 12 months of unemployment, which means when you make a claim it will be assessed against any occupation you are suited to by training, experience or education.

You may cease to be covered after a period of unemployment

In a small number of cases an insurer may cease to provide any income protection cover once you have been unemployed for more than 12 months.  You should check your policy’s features to see if this is the case.

No cover while unemployed under superannuation policies

If you have an income protection policy from a superannuation fund, including one owned by a self-managed super fund, you will not be able to claim an income protection benefit while you are unemployed.  This is because superannuation legislation requires that you be “gainfully employed” immediately prior to becoming sick or injured.

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