Most income protection policies are flexible and can be tailored to suit your personal circumstances. There is a wide range of individual options available offered by different companies. Some might be unique; however, there are some common options that are worth considering and these are:
Types of Cover: Agreed Value Policy or Indemnity Policy
1. Agreed Value Income Protection Policy
This is the most expensive option as the policies' premiums are approximately 20 per cent higher than for indemnity policies. It pays out a monthly payment in the amount that is agreed upon or stipulated in your policy that reflects your income at the start of your policy.
Any fluctuations in income do not affect the cover so there is the advantage that you know the amount you will receive, regardless of changes in your income. Moreover, this type of policy will cover you regardless of employment status, so this is particularly useful for self-employed people.
2. Indemnity Policy
This is the more common and less expensive income insurance policy. The monthly payment will be assessed through verification of your income at the time when you make a claim and may cause adjustment to your benefit accordingly which could be an issue if your salary fluctuates in instances when you have taken maternity leave, worked part time or became unemployed.
Superannuation funds can be used to provide for these indemnity policies. Premiums can be deducted straight from the member account. Superannuation funded policies are the cheapest option and indemnity value-based. However, this type of policy offers fewer features and less flexibility. Moreover, this type of policy is sufficient for those who have a reliable, regular income.
There are some superannuation funds that offer income protection insurance as default cover. This type of superannuation funded policy automatically accepts applications without medical checks - and provides an option for those who would otherwise not be covered.
Understanding Benefit and Waiting Period
Benefit Period
This is the period where, in the event of a claim, you will receive your income protection benefit payments. This could be from 1 to two or five years or to a specific age. For instance, this could be up to age 60 or 65.
You will be the one to determine the benefit period that suits you, so you must consider these:
The length of the benefit period depends on the amount of cover you are willing to pay for. The longer the Benefit Period the higher the premium. However, there is the potential for a long term claim. Choose a longer benefit period as much possible so that you can protect yourself in the event of long term disablement.Waiting Period
This the time between a valid claim is made (when you are incapacitate and unable to work) and the time when you start receiving your first income protection payment. A waiting period from 14, 30, 60, 90, 180, 360 and 720 days are usually chosen. This means that if you chose a 30 day waiting period, then you will start receiving payments after 31 days from the day you made a valid claim.
In choosing a waiting period, you must also take into account these other considerations:
The waiting period chosen has a significant influence on the cost of a policy or the premium. You must remember that income insurance are undertaken for the express purpose of protecting you for the long term so choose a longer waiting period for a lower the premium, i.e. changing a waiting period from 14 days to 30 days can sometimes half the premiums. The longer the waiting period chosen, the lower the premiums. There are sick leave and accumulated annual leave and potentially long service leave that you can use before income protection would need to kick in. Accident Benefit - which will waive the waiting periods in the event of an accident offered by many companies will attract an additional premium. Insurance For Early Retirees
0 comments:
Post a Comment