Income Protection Insurance

 Income Protection

This is one of the more popular types of insurance probably because it seems the most simplest type of cover.

Basically you can insure up to 75% of your income, so that if you are unable to work due to an accident or illness the insurer will pay the agreed amount every month for either a set period or until you go back to work or reach retirement age.

One of the reasons this insurance is popular is that the premiums are tax deductible, but the benefit amount is classed as income and is taxable.

The insurance is undewritten in the same way as Life insurance but the benefit amount is determined by your income usually the insurer will cover up to 75% of your salary. The important thing to remember for the benefit amount is when you prove your income, I feel it is best to prove income when you take out the policy sometimes known as "guaranteed"if you don't, you have to prove your income when you make a claim also known as "Indemnity"this can cause problems especially if you rely on commission to form part of your income.

Waiting Period

This is the length of time you have to wait before you can make a claim, the longer the waiting period the cheaper the insurance. Waiting periods generally start at 14 days (the shortest) to 2 years the most common waiting period is 90 days. The waiting period is very important if you opt for a waiting period of 90 days you have to make sure you can pay all your bills for 4 months without any income. If you opt for this waiting period I would suggest you have an a mount of cash put away in a savings account equal to 4 months bills.

Benefit Period

This is the length of time the insurer will continue to pay the benefit. Usually this is 2 years, 5 years or until the age of 60/65.
Some occupations have a high risk category so some insurers will only offer 2 or 5 years.

Own Occupation or Any Occupation

This part of the insurance commonly gets overlooked but can be very important. You can pick when you take out the policy but in certain occupation (high risk) you don't get a choice so its best to find an insurer that will offer own occupation. It may not seem important but imagine if your employment required a certain a mount of physical dexterity and you developed arthritis so unable to carry out your normal work. under Any Occupation you would be expected to find alternative work rather than claim on your insurance under own occupation you you can make a claim. Another detail to consider are terms like perform your "main duties" and "perform your duties" and "work continuosly"