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How Income Protection Insurance Works

If you want to buy income protection insurance then chances are that you have many questions about how this type of insurance works. The following paragraphs will elaborate on everything you must know about income protection cover before opting for it.

Income protection cover protects the policy holder when he cannot work due to falling ill or getting into a severe accident. Usually income cover policies protect policy holders when they are temporary or permanently disabled. When the policy is active, the policy holder gets a fixed amount every month so that he and his family can continue living life without facing any inconvenience. Most insurance companies cover up to 65% of the policy holder’s annual salary however a few companies may offer an additional 8% if the policy holder has miscellaneous benefits.


Important Factors To Consider

There are various factors taken into consideration when buyers are offered a quote for premium by the insurance company. Some of these factors include age, current health status, pre existing medical conditions, gender and type of occupation. People who work in high risk jobs are charged a higher premium compared to people who work in low or medium risk jobs.

Another important factor that decides the amount of premium is the waiting period. Depending on the policy holder’s choice, he can wait between 14 days – 2 years to get his first amount, after which he will receive amounts every month. The waiting period is put in place to help people use up their existing leave before opting for income protection amounts.

Buyers should note that by selecting a longer waiting period they will have to pay a lower premium, however this decision should be made only after various factors are taken into consideration. If the buyer doesn’t have too many paid leave or other sources of income then he should opt for a shorter waiting period since this will be beneficial for the family of the policy holder.


Types Of Income Protection Plans

There are two types of premium plans that are offered to buyers who want to opt for income protection insurance. Stepped premiums are usually beneficial to people who need the policy for less than 10 years where as leveled premiums are beneficial to people who need the policy for more than 15 years. By opting for a leveled premium policy, the buyer will benefit by paying a fixed amount for premium, however by opting for stepped premiums the buyer can benefit from the initial low premium cost.


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