There are some things in life we just don’t want to think about, such as life insurance and income protection insurance.
After all, who wants to consider the idea of dying, or being unable to work for an extended period of time due to sickness or injury and the financial difficulty that may bring?
But it’s for that very reason that Income Protection Insurance should be considered, especially if you have a family that depends on you and you find yourself injured and unable to work for a few months or more. Things could start to get very tricky when it comes to meeting ongoing expenses such as mortgage repayments, utility bills, and groceries.
As with Life Insurance, Income Protection Insurance policies vary considerably, so it’s important to do your homework and understand what the premiums will cost, how much and how long you’re covered for, and under what circumstances you’ll be entitled to lodge a claim.
There are two main types of Income Protection cover – agreed value and indemnity value.
Agreed value cover is the more expensive option. This type of cover pays out an agreed benefit amount that is reflective of your income when you take out the policy, rather than when you submit a claim, whereas indemnity value policies determine your payout based upon your earnings at the time of your claim.
If you happen to be earning less or are out of work at the time of your claim, the amount you will receive will reflect that under an indemnity value policy.
A number of factors impact how much you’ll pay for your premiums, such as the benefit period, which is the maximum duration the policy will pay out for following a claim. A benefit period can be anything from a few months up to five years or more depending on the type of policy you take out and how old you are.
Generally, the more you pay in premiums the more comprehensive your cover is and the longer you’ll be covered for – likewise with less expensive policies being less comprehensive. Always find out how long a policy’s benefit period is, and exactly what you’re covered for, so you’re not faced with a potential sticky situation if you do have to make a claim and your payments stop before you can return to work.
There is also typically an upper age limit on when your benefit payments stop. This varies from one provider to another but is usually somewhere between the ages of 60 and 65.
If you are approaching 60 and currently hold an income protection policy, you may wish to check what the age limit for claims is with your chosen provider, so you know you’re still able to claim should you be required to.
Typically, you won’t be covered for your entire income, with most policies covering up to 75% of your income as well as placing a monthly cap on the amount you can receive each month. With TAL’s Income Protection, this figure is $10,000 per month.
Another feature that insurers use to calculate the cost of your premiums is your occupation. For example, someone who works in mining will pay a higher premium than an office worker because of the greater associated risk of injury within their profession.
If you don’t already have income protection insurance, and you’re interested in how much a policy might cost you, head over to TAL Lifetime Protection and use the CoverBuilder tool to get an income protection quote. Then take out Income Protection online or by giving us a call to start protecting your income should the worst happen.