Explaining Income Protection
I understand how hard it is for the average man or woman to find relevant insurance covers given all the bells and whistles some policies have.
I will try and explain some of the more common terms associated with Income protection,life,trauma and tpd insurance.
Non cancellable or cancellable contracts…. As discussed in the previous article(income protection vs sickness & accident) One of the key features of purchasing income protection as opposed to sickness & accident insurance is that once the policy has been accepted by the insurance company it cannot be cancelled so long as the premiums are being paid up to date.With a sickness & accident policy the insurer reserves the right to cancel the contract prior to renewal.This may occur in the event of a clients claim history or upon the diagnosis of an illness/disease eg diabetes.
Agreed value vs Indemnity
With a guaranteed contract the sum insured (monthly benefit) is underwritten up front based on supporting financial evidence – e.g. payslips, and other forms such as your tax return. Once accepted by the insurer the monthly benefit is guaranteed to be paid at claim time. With an indemnity contract however the benefit paid is based on the individuals earnings at claim time – this can be a problem if that person has suffered an illness but continued to work albeit in a reduced capacity hence lower earnings or if the clients income has been reduced sometime after the cover was first taken out.
Maximum cover available. In Australia the maximum benefit 75% with some insurers allowing an additional 9% (for superannuation/retirement contributions).
Waiting Period- is the length of time you need to be off work before you can claim any benefit. The shortest period is 14 days, with the standard being 30 days and the longest waiting period 2 years. Most insurance companies also have a short accident wait on policies as an additional extra.
Benefit Period-Is the maximum amount of time you will be paid. these range from 2 year sup to age 65.
Level or Stepped premiums. If you have a long term need which is generally over 15 years, you would be best advised to take out a level premium contract where the premium over the long term is averaged out and you pay a consistent premium level. Although every persons circumsstances are different,the majority of people take out stepped premium policies.
Hopefully these explanations helped a little. If you want to know more or would like to take out some insurance please give us a call on 1800 737 926Contact us for a quote