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Key Factors to Consider when choosing Income Protection


Income protection insurance not only ensures that policy holders get monthly amounts when they cannot work but these plans also provide additional benefits such as transplant surgery benefits. While choosing income protection plans, buyers should consider which benefits they get along with other key factors so that they get the best policy for the lowest premium.

The first key factor to consider is the type of benefits offered. While some insurance companies offer up to 75% coverage on the gross annual income of the policy holder, other plans offer an additional 8% provided the policy holder qualifies. Most income protection covers also offer 2 or more benefits for no cost such as cosmetic surgery benefit, death benefit and day one claim benefit.

The second key factor to consider is the type of premium. Buyers have the option to choose between stepped premiums and levelled premiums. Stepped premiums allow buyers to enjoy low interest rates for the first few months and are suitable for people who want a policy for a short time. Levelled premiums on the other hand allow buyers to pay a fixed amount every year and are beneficial in the long term.

The third factor to consider is the waiting period. All policy holders are required to wait for a certain number of days or months before they receive their first payment from the selected insurance company and this is known as the waiting period. The waiting period starts after the buyer has filed a claim and the waiting period ranges from 14 days – 2 years. Policy holders who select a shorter waiting period have to pay a higher premium compared to policy holders who wait for a longer time.

The fourth key factor to consider is the cost of the income protection insurance plan. Good income protection policies cost 2-3% of the policy holder’s annual income. Insurance plans that offer limited benefits usually cost a few dollars lesser. Another factor that affects the cost of the policy is the type of contract selected. Indemnity contracts are cheaper than value agreement contracts. The age, gender and occupation of the buyer will also affect the price of the policy. Other factors that can affect the price of the insurance policy include pre existing medical conditions of the buyer, current medical condition and habits of the buyer. People who smoke, consume alcohol on a regular basis or take unnecessary risks will be charged a higher premium compared to non smokers who do not consume alcohol and do not take risks.


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