If you’re in the market for life insurance, you’ve probably seen insurers offering deals that make mention of policy waiting periods.
Waiting periods can affect everything from when your insurance policy will start paying your benefits to how much your premiums will cost, so the more you know about them, the better off you’ll be when making decisions about your life insurance needs.
In this blog, we explain what exactly waiting periods are, which life insurance products they apply to, and how long they may be.
What Is a Waiting Period?
Waiting periods are set amounts of time you must wait before your insurer will issue certain benefits from an insurance policy.
Waiting periods work differently depending on the life insurance product you’ve purchased.
Depending on your policy type, you may have:
- No waiting period: You can claim as soon as you purchase your policy.
- A fixed waiting period: You must wait a fixed amount of time before you receive benefits.
- A flexible waiting period: You can choose how long you wait before your benefits are paid.
Which Life Insurance Products Have Waiting Periods?
Life Insurance Waiting Periods
Typically, the only waiting period that applies to Life insurance policies is in relation to suicide. Most retail life insurance policies have a 13 month waiting period before suicide is a claimable event. Outside of suicide, most retail life insurance policies will cover all causes of death after the cover commencement day – a date listed in the policy schedule document that’s sent to you once your application has been approved.
Some insurers even offer applicants “interim accidental death cover” while they are waiting for their life insurance application to be assessed and approved.
If your life insurance policy comes with terminal illness cover, it’s important to note that some insurers require that you hold your life insurance policy for a set period of time before you can apply to receive a lump-sum terminal illness benefit.
Income Protection Insurance Waiting Periods
When talking about income protection insurance policies, a waiting period refers to the amount of time between the date you become unable to work (due to illness or injury) and the date when you receive your first income protection benefit payment.
When you first take out your income protection insurance, you’ll usually be given a choice between several flexible waiting period options. These can be as short as two weeks or as long as two years.
Policyholders can expect to pay higher premiums for policies with shorter waiting periods.
Many insurers also pay income protection insurance benefits in arrears, meaning policyholders will need to wait for an additional month after their waiting period has finished before they receive their first payment.
Waiting periods for income protection policies are different from benefit periods. Benefit periods are how long you will receive your income protection payments for.
Trauma Insurance Waiting Periods
The waiting period for trauma insurance is usually fixed by the insurer and refers to the time between when the policy is first taken out and when the policyholder is first diagnosed with a critical medical condition. It is important to note that waiting periods will typically only apply to specific medical conditions listed under the trauma contract and there will often be a number of conditions that are not subject to a qualifying period.
The vast majority of Australian insurers have a 90 day waiting period for trauma insurance policies, which will start either:
- When they first take out the policy
- When they upgrade their policy or;
- When they reinstate their policy
Insurers sometimes refer to a trauma insurance waiting period as an “exclusion period” or a “qualifying period”.
Sometimes insurers will waive this period if you are transferring a similar trauma insurance policy over from another provider.
As with life insurance policies, exclusions for suicide and self-injury also apply to trauma insurance policies for a set amount of time after the policy is first taken out.
TPD Insurance Waiting Periods
TPD policies do not have waiting periods or qualifying periods like Life Insurance, Income Protection and Trauma insurance do. The only time restriction that often applies to a TPD policy is in relation to the amount of time you must be unable to work before the insurer is willing to consider your claim. Typically insurers will want to see that you have been unable to work for an extended period (generally 6 months) before being able to confirm that you are Totally and Permanently Disabled.
Whether a TPD Insurance claim will have a time restriction or not will depend on how the policyholder’s particular total and permanent disability fits within the insurer’s disability definitions outlined in their PDS.
While some conditions obviously meet insurer’s definitions of total and permanent disability, others may require longer periods of medical assessment and ongoing treatment before a lifetime diagnosis is reached.
How Do I Know if My Policy is Subject to a Waiting Period?
Ultimately, whether or not you’ll have to sit out a waiting period before you can make a claim, and how long that waiting period will be will both depend on:
- The type of life insurance product you have (life insurance, income protection insurance, trauma/critical illness insurance or TPD cover)
- Which insurer your policy is held with
- The terms, conditions and definitions within your policy’s Product Disclosure Statement (PDS)
If you have questions about waiting periods for insurance products that you already own, contact your insurer and request a copy of your PDS. A qualified insurance adviser can look at your PDS and let you know if you will be better off with a different insurance provider, product or policy.
Call Curo Financial Services for Obligation Free Life Insurance Advice
Your time is valuable, so don’t waste it researching all of the waiting periods associated with different life insurance products, policies and providers.
At Curo Financial Services, we have insurance advisers that are trained to match you with the level of coverage you need at a price you can afford.
If you have questions about waiting periods or anything else related to life insurance, just call one of our helpful advisors on 1300 665 356, email your query to [email protected] or enter your contact details into our online form and we’ll be in touch with you right away.
General Advice Disclaimer
General advice warning: The advice provided is general advice only and in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
