What Should I Look for in an Income Protection Insurance Policy?

Income protection insurance should be on the top of the priority list for all the working people. This insurance policy can give you a large portion of your salary if you are not able to work due to some illness or injury. The time for which you get the benefits depend on your choice of the length of the cover that is for 2 years, 6 years or till the age of 60 or 65. The insured will have to pay for the cover he chooses. The income protection insurance policy and the critical illness coverage should be the coverage looked for by unmarried individuals that do not have any liabilities, dependents in case he loses job or dies.

There are few things that you need to consider or look for in an income protection insurance policy. The first thing you need to know is whether you require indemnity or agreed value income protection insurance. Agreed value insurance is one of the most expensive policies and it agrees to pay off income at the very star of the policy and does not get affected by fluctuations in the salary. Indemnity value insurance is cheaper and is the most commonly used income protection plan which verifies your income at the time of making claim and accordingly pays the benefits. The cheapest policy is the superannuation plan which is based on indemnity and offers least flexibility and features.

Shop around for different insurance policies and compare the cost. The premium amount will be based on

  • Age, with age the cover decreases or the premium increases so look for the policy which gives you the best deal in such cases
  • Gender, check the policy on gender for giving income protection
  • Check if they have the coverage for pre-existing conditions as well
  • The type of occupation also affects the coverage and hence should check the policy benefits for your occupation.
  • The waiting period also affects the premium that you pay and hence look for the same while taking up the policy.
  • Also check if they have the option of stepped premium and level premiums. The stepped premium is cheaper in the beginning but becomes expensive with time. However, level premiums are constant and though seem to be more in the beginning generally becomes a cheaper option after 10 to 12 years of coverage.