Waiting periods are an important concept to understand when you take out an income protection policy.
Generally, a waiting period is a period after you take out a policy during which you cannot claim.
Life companies impose waiting periods to prevent policyholders from anti-selecting against the insurer and without these periods, premiums would be higher.
On an income protection policy, waiting periods work a little differently - they start when you claim and apply to each claim. You can choose the waiting periods that apply when you claim and determine when the benefits will be paid out. This waiting period will apply regardless of how long you have held the policy. Read more: What is an income protection policy?
Choose appropriate waiting periods
The ability to choose your own waiting periods allows you, if you are employed, to set a longer waiting period for temporary disability benefits in line with the sick leave you will enjoy from your employer.
If you are self-employed and do not enjoy any paid-for sick leave, you should set a shorter waiting period.
The waiting period on your longer-term income protection benefits should tie in with the waiting period on your temporary disability benefits.
For example, if you are self-employed, you could set the waiting period on the temporary disability benefit to seven days. If your temporary disability cover will pay out from day seven for up to 24 months, you can set the waiting period on your longer-term disability cover to 24 months.
The longer you set the waiting period, the more it will reduce your premiums.
If you have accumulated more leave or have saved money in an emergency fund that you can use to support yourself through a period of being unable to work, you can opt for longer waiting periods, because this will reduce the cost of your premiums. Read more: How do I set up an emergency fund?
Sickness benefits
Some life insurers sell sickness benefits to cover professionals who have difficulty proving their loss of income during short-term illnesses. These policies generally pay out an income benefit for as long as your doctor says you should not work.
Some life insurers also have minimum waiting periods for certain occupations such as hairdressers and fitness instructors.
It is possible that you may be off work with a condition for a while and then return to work for a period only to experience a deterioration in your condition. A life insurer generally will not impose a waiting period again if you need to claim for the same conditions within a specified period.
Life insurers use the term "off period" to describe a period that starts from your return to work after a disability. Usually the period is three months.
If you suffer a relapse and claim for time off work again during the off period, the waiting period will generally not apply.
