Income Protection insurance looks after your lifestyle by protecting your ability to pay bills. It is particularly important if you have financial liabilities, such as a mortgage, hire purchase, credit cards or personal loan.
Some simple questions to consider:
There are several Income Protection plans that can provide an answer these questions. The options are:
When deciding on whether, which and what income protection cover to apply for, there are a number of options to consider. Decisions you need to make which are common to most Income Protection plans are covered below. Please contact us if you have any questions or need assistance.
We suggest you calculate what regular payments you need to cover. (Do a budget). The Income Protection Needs calculator can assist you in working out how much cover you need.
We all work in different jobs, some involving more physical and other risks than others. Claims history has shown that certain occupations can lead to more claims. Occupations have therefore been graded into 5 main classes for Income Protection premium purposes. They are:
You need to decide which occupational class you belong in. Higher risk occupations are reflected in premiums.
You can choose an Agreed or Indemnity cover which will be up to a maximum of either 55% or 75% of your gross income.
To ensure payments are a realistic reflection of your income at the time of claim, your payments are based on up to 75% of your average monthly income prior to disability, and may be taxable. Indemnity Value Cover pays the lesser of the sum insured; and 75% of your income before you became disabled, less any income or benefits you are still receiving or entitled to receive.
Agreed Value provides cover at an agreed level, less any income or benefits you are still receiving or are entitled to receive. The agreed value sum insured is assessed at the time of application - financial information is required at this stage. It is normally up to 55% of your gross income, and is a tax paid benefit.
We suggest that you talk to your tax adviser regarding the tax status of the policy as it relates to you.
Your income protection insurance payments will not start until after your waiting period. You choose the waiting period. The longer the wait period the lower the premiums.
If you have savings, or have extensive sick leave, or are in a two income household then you might be able to extend your waiting period – lowering your premium.
You will usually have a choice of how long your benefit (the money paid if you need to make a claim) will be paid for – there is normally a choice. E.g. if you choose a pay period of 5 years, and need to make a claim, you can receive payments up to 5 years. After that the payments will stop - regardless of whether you're able to work or not. The longer the benefit term - the higher the premium.
All Income Protection policies include a waiver so that you will not have to pay premiums while on a claim.
There are a range of other benefits or options which may be included. Check the benefits of your selected plan.