Factsheet: Income Protection Insurance

The moment you think of getting an income protection insurance the questions that pop up in your mind is, what is income protection? Why do I need it? How to get it? Well! Income protection as the name sounds is a way of insuring that you get income even when you get into a medical condition when you cannot go to work. This is a way of protecting your family against financial crisis due to your illness or any injury. Many of the income protection insurance companies may provide you with 75% to 85% of the taxable income if you become partially or totally disabled. It gives you the freedom financially to just concentrate on your recovery and treatment.

Waiting period:

All the policies of income protection have a waiting period which varies from 30 days, 60 days, and 90 days to up to 2 years. The waiting period can be chosen by the insured. It is the time period between your claim and the first benefit that you avail. Shorter is the waiting period, higher is the premium.

Benefit period:

The benefit period is the length of time you want to avail the benefits. It may vary from a few moths to your retirement age.

Indemnity and Agreed Value Contracts:

In agreed value contract the insured gets the same assured amount of income as stated in the contract. There is no change in the amount of money that is paid monthly. However, in case of indemnity contract the payment of monthly income is assessed at the time the claim is made.

All the Optional and Included Extras:

Many of the insurance companies provide included benefits without any extra cost while some optional benefits for some extra charges:

  • Included benefits may be, a recurring benefit for any kind of disability, benefit of a surgery or transplant, benefit for a specified injury and also death benefits
  • Optional benefit may include cover for the day 1 accident and coverage for business expenses.

How much should be considered enough?

The amount of cover you require will depend on many factors. The maximum that one can insure for them is mostly 75% of the taxable income. The tax is applicable on the benefit paid. It is a good id to consult a financial advisor to determine the level of cover one requires in case of no work due to injury or illness.