Can You Return to Work While Receiving Income Protection Payments?

At a glance:

• Income protection policy is meant to help you recover, not prevent you from returning to work.
• Partial Disability Benefits help bridge income gaps, ensuring ongoing support if you’re not earning your full pre-claim salary during recovery.
• Payments may be adjusted based on your new income and any other benefits received, such as workers’ compensation or superannuation.
• Notifying your insurer about changes in work status, which can lead to overpayments, investigations, or even policy cancellation, is critical.
• Expert advice for a Seamless Return to Work While Receiving Claims.

Getting back to work after an injury or illness is often a big milestone. But, there’s a question among many income protection policyholders: can you return to work when you are in good health and still receiving the benefit?

Well, Income protection is designed to support your recovery and not discourage you from returning to work. In fact, many policies, including ours at Aspect Underwriting, promote a gradual return, allowing for part-time or modified duties. However, you must be aware that resuming work can also affect your monthly payments.

This blog will guide you through everything you need to know about returning to work while still receiving income protection payments.

Can You Return to Work While Receiving Income Protection Payments?

Yes, under several circumstances, you can perform your work duties even after securing income protection benefits. Depending on the terms of your policy, you may be able to:

• Return part-time, easing back into your role with fewer hours
• Take on reduced duties that are less physically or mentally demanding
• Follow a structured return-to-work plan developed in consultation with your doctor, employer, and insurer

In fact, during this period, the Partial Disability Benefit acts as a supplemental policy payment to cover earnings gaps that exist while you perform at a reduced capacity in your employment.

Many income protection policies might also provide additional benefits to their customers, including support for rehabilitation and return-to-work services. The benefit programs include training, counseling, physical therapy, and workplace adjustments to help you return to work safely.

How Payments Are Affected When You Return to Work

When you return to work, your insurance payments can change depending on your income and the terms of your policy. Here’s how it generally works:

Partial Disability Payments

If you can return to work but at a reduced capacity, it’s most likely you will earn less than before. In such cases, some insurers offer Partial disability payment benefits. This policy will pay part of the missing income and help make up the difference during your recovery.

Partial disability payment is usually calculated based on how much your post-disability income falls short of your pre-disability earnings (i.e. Total Disablement Benefit – Current Income). Suppose you used to earn $1,000 a week but now earn $600; your insurer may pay up to $400 a week to cover the gap.

Read more: Income Protection Claims with Partial Incapacity: How Does It Work?

Offset Clauses

For those who are collecting payments from others, you might be at a disadvantage. An offset clause allows insurers to reduce your benefit payments by accounting for income or benefits received from different sources during a claim. This could include:

• Workers’ compensation
• Superannuation or Pension benefits
• Statutory payments
• Income from an employer, second job, business partnership, or former employer
• Help from any government authority

The main purpose of the Offset clause is to ensure that claimants don’t earn more while disabled than they did before, encouraging them to return to work. Now, let’s take a look at one of the examples of this policy decreasing your benefits below.

Let us assume that your pre-disability income is $6000 per month and your income protection benefit is $4500 per month (based on 75%). If you get $2300 from part-time work, your benefit would now stand at $2,200 per month ($4500-$2300).

Remember, offset clauses may be company-specific, and the policies may vary.

Read more: How Income Protection Insurance Benefits Are Calculated

Full Return to Work

Once you return to work and make at or above your pre-claim income, your income protection payments should end. For example, returning to a $6,000/month salary (vs. pre-disability $5,000) terminates payments immediately. Your insurance company requires evidence about your working conditions and salary to verify your situation.

Declining Available Work

In a given circumstance, where the insured person can return to work but chooses not to, your insurance benefit might be lowered or terminated. At Aspect Underwriting, the benefit can be reduced to 25% of the full disablement benefit each week.

Things to Check in Your Policy Before Returning to Work

Before you begin working again, make sure to review your policy’s Product Disclosure Statement (PDS) and confirm the following:

• Check whether you can work part-time or gradually return to full-time.
• What is the definition of total vs partial disability in your insurer’s terms?
• Does your policy allow partial payments if you return to reduced hours/duties?
• How long will partial payments continue (e.g., 12 months vs. 5 years)?
• How much will benefits reduce based on post-return earnings?
• Are there any rules about notifying the insurer when your work status changes, along with time restrictions and required notifications?
• Does your insurer require updated medical clearance for modified duties?
• Does your insurance provide any form of rehabilitation support together with work-based recovery programs?

What Happens If You Return to Work Without Notifying Your Insurer?

The majority of policyholders think they only need to notify the insurer when returning to full-time work; however, you should also report any change, including performing part-time work or modified job responsibilities. Any failure to report this change could create consequences such as:

• The insurer may void the policy entirely for breaching disclosure obligations.
• Future claims may be rejected due to non-compliance with notification terms.
• Non-disclosure could lead to benefit suspension and cancellation, as well as an investigation of your claim.
• Insurers may halt payments if return-to-work plans are ignored.
• Failure to report part-time work could risk losing proportionate payments like Partial Disability Payment.
• Insurers could demand repayment of benefits paid during undisclosed work periods.

Therefore, updating your insurer about work status changes is essential for benefit accuracy and coverage protection.

Tips for a Smooth Transition Back to Work While on Claim

Employing a period of sickness or injury before returning to work creates both positive excitement and obstacles to overcome. Several pieces of advice exist to help your transition become less demanding:

• The transition back to work will run more smoothly if you maintain regular communication with your insurer, employer, and provider.
• Make sure to get approval and certification from your healthcare provider confirming your ability to perform work duties.
• Disclose return-to-work plans to adjust benefits and avoid penalties.
• Create comprehensive documentation that includes your work hours, duties, and earnings amounts.
• Update insurer regularly on health progress and work capacity changes.
• Talk with a financial professional or contact expert insurer if you need help understanding how your benefits status might change.

Lastly, it’s important to understand how your policy works. Your insurance payments may decrease or stop based on your wages and ability to work, while non-disclosure of changes in your employment could result in the complete loss of benefits.

If you want to learn more about the step-by-step process of claiming Income Protection Insurance successfully, check out our detailed article here.