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Have you heard your insurance adviser talk about non-cancellable insurance? Did you understand what they were going on about?

For a tradesman, the term ‘non-cancellable insurance’ will almost always be in relation to an income protection policy or a sickness and accident insurance policy.

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Although you may not be too concerned about the specific details of your income protection, it is very important to know the difference between a cancellable and a non-cancellable policy.

What is a Non-Cancellable Policy?

A non-cancellable insurance policy is generally one issued by a life insurance company such as Asteron or Macquarie Life.

It means that no matter how many claims you have or how your health changes, the insurance company cannot cancel your policy or refuse your renewal as long as you keep paying the premiums.

The insurance company is also unable to increase your premium based on any claims or other changes that occur after your policy has been put in place.

A non-cancellable income protection policy gives you the security of knowing that your insurance will always be there for you.

What is a Cancellable Policy?

A cancellable income protection policy is one that is issued by a general insurance company such as Vero or QBE.

With a cancellable income protection policy (generally known as sickness & accident insurance) the insurance can increase your premium or even cancel your policy if you have made too many claims for their liking or if your health has changed.

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A cancellable policy gives you very little long term security, as the insurer can simply cancel your policy or refuse your renewal after a claim, leaving you in a position where it is difficult to get covered again.

Income Protection or Sickness & Accident?

Despite some insurance brokers confusing these two products, income protection insurance and

sickness and accident insurance are actually two very different covers.

Although both polices are designed to replace a percentage of a tradies’ income if he cannot work, the big difference is that a proper income protection policy is non-cancellable (good) and a sickness and accident policy is cancellable (bad!).

Both policies will generally have quite similar premiums, but generally speaking a proper income protection policy will provide a more comprehensive level of protection for a tradesman.

Telling the Difference

The first hint of whether or not your income protection policy is cancellable or non-cancellable is based on who has provided you with the policy.

If your policy was setup by an insurance broker, it will most likely be cancellable. If your policy was setup by a financial adviser, it will most likely be non-cancellable.

Another hint comes from the wording of your policy documents. If the policy states income protection it is likely to be a non-cancellable policy, but if it states sickness and accident, or accident and illness, then it is likely to be a cancellable policy.

The safest option is to simply ask your insurance adviser or insurance company what type of policy you have. If you are still unsure, feel free to contact the team at Trade Risk and we will be happy to take a look at your existing income protection policy.

Why Do Brokers Only Use Cancellable Policies?

Insurance brokers and financial advisers fill a similar role, however they are qualified and licensed to deal in two separate classes of insurance.

Insurance brokers can only deal in ‘general insurance’ products, whilst financial advisers can only deal in ‘life insurance’ products.

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Sickness and accident insurance (cancellable) falls under the general insurance category, whilst proper income protection (non-cancellable) falls under the life insurance category.

Since insurance brokers can only provide general insurance products, they can either recommend a cancellable policy, or refer you to a financial adviser for a non-cancellable policy.

Whilst some brokers will do the right thing by referring their clients to a financial adviser for proper income protection, many will simply write a cancellable policy themselves. Unfortunately many tradesmen are unaware of this.

The Trade Risk Way

Here at Trade Risk our team consists of both general insurance brokers as well as insurance brokers. This means that we can refer you to the best person for job, regardless of which type of insurance you need.

Generally we will refer you to an insurance broker for your public liability and tool insurance, and to a financial adviser for your income protection and life insurance needs.

Your insurance broker and financial adviser can then work together to create an overall trade insurance package that will best suit your needs and your budget.

For more information on these types of insurance please get in contact with us.

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In 2017 Trade Risk was awarded a Gold Trusted Service Award for the amazing service we offer to thousands of tradies from around Australia.

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