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Compare Income Protection Insurance Policies

Imagine the stress if you received an injury or illness and were no longer able to work. With Income Protection insurance, you can have peace of mind knowing that your finances will be covered if you ever found yourself without an income.

Income Protection insurance provides up to 75% of your income if you were unable to work because of an illness or injury. You will receive this cover until you are able to return to work – or at the end of your chosen payment period.

But how do you know that you’re getting the right Income Protection insurance policy for your unique life situation?

There are a lot of choices when it comes to Income Protection policies. While most policies feature many of the same standard benefits, there are some differences between policies that you need to be aware of.

How do Income Protection policies differ?

Coverage and benefits can vary widely depending on provider. Most differences relate to the following:

Type of disability

Your benefit will differ according to the extent of your disability. Whether you have a full, partial or recurring disability will impact on the amount of cover you may receive.

Type of income

Whether you receive a fixed salary or a business income, this must be taken into account to calculate your coverage.

Waiting period

You can select the amount of time you wish to wait between being unable to work and receiving your first benefit payment. The waiting period can vary between 14 days and two years.

Payment period

You can select how long you would like to receive your benefit. This is usually either a set number of years, or to a specific age, like 65 years. Keep in mind that the longer a period you choose, the more expensive your premiums will be.

Additional benefits

Opting for a number of additional benefits can improve the depth of your coverage, but will also increase your premiums. Depending on which policy you select, some additional benefits include:

  • Increasing Claim Option

Whilst you are on a long term claim, the Insurance company will increase the monthly benefit payable by a certain percentage in line with indexation.

  • Day 1 Accident Option

Depending on which insurance company you select, if you are totally disabled for a certain amount of consecutive time during the waiting period, the insurance company will pay a benefit from the beginning of the waiting period.

  • Booster option

This benefit pays up to an additional 1/3 of the monthly benefit payable.

  • SuperSaver or Priority Income

You can insure an additional 5% of your monthly income for either mortgage maintenance or superannuation contributions. Meaning you can actually insure up to 80% of your monthly earnings.

key differences of income protection

Read here for a greater list of all the key benefits.

What types of Income Protection Insurance are available?

Most coverage falls into one of two categories:

  • Agreed value cover, where you provide evidence of your income when you purchase the policy and insure for a set amount
  • Indemnity value cover, where proof of income is provided when you file a claim

Indemnity cover is generally cheaper than agreed value cover, but has the disadvantage of a smaller payout if your income has reduced since you purchased the policy.

Therefore agreed value cover is often the better choice for self-employed individuals who want guaranteed protection, regardless of fluctuations in their income.

On the other hand, salary earners who don’t expect to see reductions to their income in the foreseeable future often choose indemnity value cover instead.

Find out more about indemnity vs agreed value cover here.

How to make sure your policy meets your needs

No two policies are the same. Because of this, it’s important that you read the whole policy’s product disclosure statement (PDS) so you know just what it and isn’t covered.

At Wealth Smart, we’re aware that comparing and choosing the best policy for your needs can be daunting and overwhelming. Wealth Smart can help you find an income protection package that will best suit your personal circumstances. Ask for a quote or contact us today.

Page last updated: January 14, 2015