| Income Protection is a vital part of your insurance | | | | Agreed Value or Indemnity? |
| program. This article discusses some key features of | | | | These terms refer to how much you will be paid while |
| income protection which need consideration. | | | | on claim. |
| Benefit Period - This term refers to how long you will | | | | Agreed Value An agreed value policy is one where |
| be paid if you are on claim. The standard benefit | | | | the amount payable while on claim is agreed at the |
| periods offered are: | | | | start of the contract. This is validated by providing the |
| - 1 year | | | | insurance company with proof of your financial |
| - 2 years | | | | earnings at the time of application. Proof of income is |
| - 5 years | | | | generally provided in the form of last 2 current pay |
| - to age 55, 60 or age 65 | | | | slips if you are an employee or last 2 years annual tax |
| There are a number of reasons why there are | | | | returns. For self employed people not only do you |
| different periods: | | | | need to provide personal income tax returns, but in |
| - One major factor is your occupation. High risk | | | | some cases the insurance company may also want |
| occupations where this is a greater chance of claiming | | | | tax returns from your business as well. Once you |
| such as heavy manual work are usually restricted to | | | | have proven your income, you have peace of mind |
| shorter benefit periods. | | | | that if you have to claim, you know what the payment |
| - Retirement age. This is why there are plans which | | | | will be - regardless of what you are earning at the |
| cease at age 55, 60 and 65 - so that you can mirror | | | | time of claim. |
| your intended retirement age. | | | | Indemnity An indemnity policy is where you provide |
| - The other main reason is to give people choice and | | | | specific income details at the time of claim. So while |
| flexibility with price, as the shorter policies are generally | | | | you provide your general income at the time of |
| cheaper. | | | | application - you didn't have to prove it. So at claim |
| Which benefit period is the best? | | | | time, the insurance company will ask for proof of your |
| Generally, the longer the better. The longest you can | | | | income prior to claim, and if it is lower than what you |
| afford and the longest you able to get based on your | | | | had applied for, you will only be paid the lesser amount. |
| occupation. If you were to have a long term illness, a | | | | Indemnity policies are cheaper, and depending upon |
| guaranteed income until you were 65 and had reached | | | | your occupation, maybe the only style of policy |
| retirement age would provide you and your family with | | | | available to you. They are also the only style offered |
| financial protection. | | | | to people who are in new jobs or who have recently |
| Waiting Period | | | | become self employed. This type of policy will provide |
| This term refers to how long you have to wait before | | | | you with cost savings if you are a long term employee |
| being paid a claim. The standard waiting periods | | | | who has a stable income, as you know that at any |
| offered are: | | | | point in time you will be able to prove your income. |
| - 14 days | | | | Which is the best? |
| - 30 days | | | | Generally, an agreed value policy will give you peace |
| - 60 days | | | | of mind. However, if you are an employee whose |
| - 90 days | | | | income does not fluctuate, then an indemnity policy can |
| - 1 or 2 years | | | | save you money. |
| There are a number of reasons why there are | | | | Extended or Basic? |
| different waiting periods: | | | | These terms refer to how many ancillary benefits you |
| - Employees usually have sick leave accrued, so long | | | | will be eligible for while on claim. |
| term employees can take a longer waiting period, as | | | | Extended. |
| they know their incomes will continue due to their sick | | | | An extended policy includes all benefits available. It is |
| leave | | | | generally the top of the range product which has |
| - Self employed people on the other hand who have | | | | every 'bell and whistle'. In addition to paying you an |
| no sick leave, need to make sure that they are | | | | income while you are on claim you may be entitled to |
| covered with the shortest waiting period they can | | | | additional benefits such as home nursing care |
| afford, so that their cash flow continues | | | | allowance, travel allowance for you and family |
| - A 2 year waiting period is very common where a | | | | members if you require treatment in another city etc. |
| person has a 'total but temporary benefit' under their | | | | Basic A basic policy gives you protection only. It is |
| superannuation plan | | | | often referred to as the 'no frills' product. Basic policies |
| - so they tailor their personal income protection policy | | | | are cheaper, and depending upon your occupation, |
| to start at the time that the income under the total but | | | | maybe the only style of policy available to you. |
| temporary benefit stops. The other main reason is to | | | | Which is the best? |
| give people choice and flexibility with price, as the | | | | It depends what you are looking for. If price is an issue, |
| shorter waiting periods are generally more expensive. | | | | consider basic however if you believe that the ancillary |
| Which waiting period is the best? | | | | benefits may come in handy, go for the extended |
| Generally speaking, the shorter the better. | | | | policy. |