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Things You Must Know Before Purchasing Income Protection


Buyers are always encouraged to buy the best income protection plan they can afford since these policies ensure that policy holders do not have to suffer when they cannot work. 4 things all buyers must know before buying income protection insurance.

 

Indemnity contracts & Agreement contracts

Indemnity contracts do not cost as much as value agreement contracts. If a buyer buys an indemnity contract then when he files a claim, the amount received by him will be decided at that time by the insurance company. In the case of indemnity contracts, the buyer has to submit financial documents while the claim, and depending on his earnings, he will receive a payout amount.

However, in the case of value agreement contracts the buyer has to submit financial documents while submitting the application and the buyer will receive a fixed amount that has been decided while applying for the contract. Value agreement contracts are preferred since they ensure that the buyer receives a fixed amount even if his earnings have been reduced while he files a claim.

 

Waiting time frame

The waiting time frame can be selected by the buyer and a shorter waiting period will increase the cost of the premium. The cut off age for the benefit period can be between 60 – 70 years. If a buyer selects a contract with a higher cut off age then he will have to pay a higher premium. Income protection policies allow the policy holder to receive monthly payments for a fixed amount of time which is decided when the application is submitted.

 

Other factors

Other than the waiting period and the type of contract selected, there are a few other factors that affect the cost of the policy’s premium. These factors are, the age of the buyer, the gender of the buyer, the type of job, pre existing health conditions and current health status. People who work in high risk jobs, people who travel a lot, people who smoke or drink alcohol are usually charged a higher premium.

 

Cancellable contracts & Non-Cancellable contracts

The best income protection plans are non cancellable. Cancellable contracts have to be approved by the insurance company before renewal and applications can be rejected if the insurance company feels that the policy holder has shifted to a high risk group. Non cancellable contracts are automatically renewed even if the policy holder has made claims in the past. Non cancellable contracts are more expensive than contracts that can be cancelled by the insurance company before renewal.


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