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Types Of Income Protection Insurance

Income protection insurance ensures that people who cannot work due to certain reasons get a steady income every month. Usually this type of insurance protects people when they fall seriously ill or get disabled but some policies also protect people if they are unemployed or retrenched. There are three types of income protection covers and the following paragraphs will elaborate in detail about these protection covers.


Indemnity value insurance

The policy is assessed when the policy holder files the claim which means that the policy holder’s financial documents have to be supplied directly at the time of filing a claim. This type of insurance cover is usually the cheapest since if the policy holder’s income is reduced after he applies for insurance, then the amount he received for the claim will also be reduced. In a nutshell it can be said that the insurance company will assess the policy holder’s financial records before making a claim payment.


Agreed value insurance

The policy holder has to submit his financial documents at the time of applying for the insurance which means that the amount received by the policy holder will remain the same even if his income reduces later on. This implies that the policy holder will receive a fixed amount when he files a claim.


Guaranteed agreed value insurance

This type of insurance is similar to the agreed value policy cover. The policy holder is financially assessed with all corresponding financial evidence when the policy holder applies for the insurance and in certain situations the decided amount may be guaranteed without any financial documents being required. Only a handful of insurance companies in Australia offer guaranteed agreed value covers.

Buyers should remember that before opting for one of the three types of income protection insurance mentioned above, they should assess their own needs. Although money is an important factor for most people, it is important to remember that these policies are meant to help people who cannot work, hence the buyer should consider his personal and financial requirements before buying a policy.

If the buyer cannot decide which policy is ideal for him then he should consider talking to an insurance representative or an advisor to get guidance. Buyers should also remember that the waiting period and certain other factors affect the cost of the premium he will have to pay every year.


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