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Income Protection Insurance – What Does It Cost


Income protection insurance is considered as one of the best types of insurance plans for people with jobs since this type of insurance ensures that the policy holder does not have to suffer when he cannot work due to problems such as sickness or disability. The following paragraphs will help you understand which factors determine the cost of this type of insurance and how much you will have to pay to get a good policy.

 

Factors To Consider

The main factor that is taken into consideration by the insurance company while giving buyers quotes for policies is the annual income of the buyer. Depending on the policy chosen by the buyer, he may have to pay 1%-3% of his annual income on premium. Since income protection covers are tax deductible, buyers have to declare all components of their income to get a correct estimate from the selected insurance company.

 

Factors Influencing The Cost

The other factors that influence the cost of the policy include the type of contract selected and if the contract is non cancellable or cancellable. Indemnity contracts are usually a little cheaper than value agreement contracts since indemnity contracts have a few limitations. The main limitation of this type of contracts is that the policy holder has to provide financial documents while he files a claim and the amount he receives from the insurance company will depend on the policy holder’s current income. This means that, if the policy holder’s income has reduced at the time of filing a claim then he will receive a reduced compensation amount from the insurance company.

Cancellable contracts are cheaper than non cancellable contracts since in the case of cancellable contracts, the insurance company holds the right to decline or reject the policy holder’s application for renewal of the contract. Non cancellable policies on the other hand are renewed automatically even if the buyer has moved to a high risk category or has filed claims in the past year.

 

Occupation

Buyers should remember that one of the most important factors that affect the cost of income protection insurance is the buyer’s occupation. People who have high risk jobs that involve activities such as construction or travelling will be charged a higher premium compared to people who have office jobs. Although buyers cannot control most of the factors listed above, it is possible to get good deals by comparing quotes from 3 or more companies and by choosing a policy that offers maximum benefits.


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