At a glance:
  • Eligibility Clarity: Understand the criteria that define partial disability and its variations across different policies.
  • Calculations Unveiled: Learn how benefits are calculated based on the reduction in income or work hours.
  • Claims Process Guidance: Navigate the claims journey by gathering the necessary documentation and adhering to insurer instructions.
Planning for the worst can be unpleasant when thinking ahead about your life. The prospect of being unable to work due to illness or injury can be frightening, but an income protection policy can help you feel more secure. Many people, however, are concerned that even an insurance policy won’t provide them with the protection they need.
Whether they’re worried about being rejected when claiming or that they won’t be covered for what they need, many people delay a decision and end up not buying income protection insurance.
Making a claim can be super simple as it’s designed to be easy for you during a stressful time. We’ll walk you through how the income protection policy works and how claims are processed, so let’s get started.
Reader concern: “Can I claim on my income protection insurance if I am only partially incapacitated?”
Suppose you find yourself in a situation where you’re experiencing a reduction in your work capacity due to illness or injury. In that case, you might wonder if you’re eligible to claim your income protection insurance. 
The answer is yes; you can often make a claim even if you’re only partially incapacitated. Understanding the criteria for partial disability benefits, the definitions set by your policy, and the calculations involved can empower you to confidently navigate your insurance and access the support you need during these challenging times.

What is partial incapacity?

Insurance companies can define partial incapacity differently, so you should carefully read the Product Disclosure Statement to see how your policy defines it. Partial incapacity, within the context of income protection insurance, refers to a situation where an individual is unable to work at full capacity in their occupation due to sickness or injury. 
This means that while they are not entirely disabled, they are still experiencing limitations that affect their ability to perform their job responsibilities as they would under normal circumstances.

Variance in Definitions

It’s crucial to note that the definition of partial disability can vary significantly among different insurance policies. The terms and criteria outlined in the policy’s Product Disclosure Statement (PDS) determine how partial disability is specifically defined. 
For instance, some policies may consider partial disability as being able to work in a reduced capacity within your occupation, while others might include working in a different occupation altogether.
In the case of Aspect income protection policies, partial disability is defined in our Protection Reference Document as follows:
  • Partial disability means that, due to sickness or injury, you are unable to work in your occupation at full capacity and:
  • you are not totally disabled, and you are working in your occupation in a reduced capacity or working in another occupation
  • your monthly income is less than your pre-disability income and
  • you are following the advice of a medical practitioner.”

Distinction from Total Incapacity

It’s important to differentiate between partial incapacity and total incapacity. Total incapacity refers to a state where an individual is entirely unable to perform the tasks of their occupation. Partial incapacity, on the other hand, indicates that while a person may still be working, they are doing so at a reduced capacity due to their medical condition.
This distinction is crucial as the criteria for claiming benefits can differ based on whether you are partially or totally incapacitated. While total incapacity might lead to full benefits, the benefits for partial incapacity are typically calculated proportionally to the reduction in your income or working hours.
Please remember to always refer to the documentation and definitions of your specific policy to make sure you meet the criteria for making a claim.

Eligibility for partial disability benefits 

Eligibility for partial disability benefits is contingent upon several key factors that assess the extent of an individual’s impairment and its impact on their work and income. Let’s delve into the factors that determine eligibility for partial disability benefits in more detail.

Duration of Work and Income Considerations

Reduced Work Hours: One criterion for eligibility is the ability of the insured person to work fewer hours than they did before their disability. If their medical condition necessitates a decrease in their work hours, they might qualify for partial disability benefits.
Decreased Earnings: Even if the insured individual can carry out their regular job responsibilities, they could be considered partially disabled if their earnings fall below a certain percentage of their pre-disability income. This recognises that their health condition is affecting their earning capacity despite their continued work.

Occupation and Role Adaptations

Different Role, Same Employer: Some insurance policies deem an individual eligible for partial disability benefits if they are working in a modified or other role within the same organisation. This acknowledges that while they may not be able to fulfil the demands of their previous job, they can still contribute in an altered capacity.
Vocational Adjustments: Eligibility criteria might encompass the ability to work in an alternate, less specialised, or lower-paying occupation due to the disability. This takes into account scenarios where an individual must transition to a different role to accommodate their health condition.
It’s essential to note that these are general eligibility criteria, and the specifics can vary widely among different insurance policies. Moreover, there might be additional requirements, such as waiting periods or mandatory medical examinations, that influence eligibility.
If you believe you meet the criteria for partial disability benefits, initiating the claims process is the next step. Contact your insurance company to begin the process, which generally involves providing documentation of your illness or injury and proof of your income. The insurance company will then evaluate your claim, considering the defined eligibility factors and the terms of your policy, to determine whether you qualify for partial disability benefits.

How do Income protection claims and partial incapacity work?

When it comes to income protection claims and partial incapacity, understanding how the benefits are calculated and how they apply to real-life scenarios is essential. Let’s take a closer look at how the process unfolds.
The benefits you receive for partial disability are typically determined based on the terms outlined in your policy. This usually involves a percentage of your pre-disability earnings. 
For instance, if your policy offers a 60% payout of your pre-disability earnings, and you’re currently earning 60% of what you earned before your incapacity, you may not receive any benefits. However, if your current earnings are only 40% of your pre-disability wage, you could receive 20% of your pre-disability earnings as benefits.

Consider the example of Ava

Ava was earning $90,000 annually while working full-time before her back injury.
Her income protection insurance policy covers 85% of her income, up to a maximum of $6,000 per month.
Following her injury, Ava’s doctor recommended that she work only four days a week, which translates to an annual income of $74,000.
In Ava’s situation, she may be eligible to claim partial incapacity benefits as follows:
[($90000 – $74000)/$90000 ] * (75% or 85% of her income)
This calculation factors in the difference between her pre-disability income and her current reduced income. The resulting percentage is then applied to her policy’s specified coverage percentage (either 75% or 85% of her income) to determine her partial incapacity benefits.
Remarkably, even though Ava has resumed working, her income protection insurance still allows her to claim an additional $13,600 per year due to her partial incapacity. This demonstrates the significance of income protection coverage in supporting individuals who experience limitations in their ability to work at full capacity.
In conclusion, comprehending the intricacies of income protection claims for partial incapacity involves recognising the calculations that determine benefits. The example of Ava showcases how this process works in practice, emphasising the importance of income protection insurance in providing financial assistance to individuals navigating partial incapacity scenarios. 

Tips for claiming partial disability benefits

Claiming partial disability benefits involves a series of important steps that can significantly impact the outcome of your claim. Here are some essential tips to guide you through the process:

Gather All Necessary Documentation

Collect essential documentation that supports your claim. This might encompass medical reports detailing your condition, employment records indicating your work history, and income statements highlighting your earnings before and after the disability. Well-organised documentation strengthens the credibility of your claim.

Complete the Claim Form with Care

Thoroughly fill out the claim form, ensuring that you provide accurate and comprehensive information. Missing or incomplete details can lead to delays or potential complications in the assessment process.

Follow Insurer’s Instructions

Adhere to the instructions provided by your insurer. This could involve undergoing a medical examination conducted by a medical professional chosen by the insurer. Providing the required information promptly and accurately helps expedite the claims assessment.

Exercise Patience

Recognise that the claims process may take some time. Depending on the complexity of your case, it could extend over several weeks or even months. Patience is crucial during this period as the insurer assesses the information and determines your eligibility for partial disability benefits.
In the realm of income protection insurance, the concept of partial disability benefits holds substantial significance. It bridges the gap between total incapacity and continued work by offering financial support to individuals experiencing reduced work capacity due to health issues. By grasping the eligibility criteria, calculation methods, and the claims process for partial incapacity, individuals can make informed decisions, confidently pursue benefits, and ensure financial stability during challenging times.

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Mike Wallis

Mike has over 25 years experience, having spent his first seven years working as a Broker at Jardine Lloyd Thomson in Melbourne and in 2002 was transferred to JLT’s Accident and Health Department in London. For four years (2002 – 2005) Mike was a specialist A&H Lloyd’s Broker and during this time developed excellent relationships with the Lloyd’s A&H underwriting fraternity. In 2006 he returned to Australia in a senior broking position with overall responsibility for Placement Strategy, including the implementation of underwriting facilities and the various authorities granted by Lloyd’s. Mike was the underwriter at two specialist Underwriting Agencies prior to founding Aspect Underwriting in 2016.