We all know insurance can be extremely beneficial to people who take it out, especially if they end up making a claim. This is no different for people seeking to insure their income, otherwise known as income protection insurance.
There are several types of insurance policies available for this type of personal insurance, and the level of cover and overall costs differ depending on your individual circumstances and income level.
The best thing about income protection insurance is that it typically usually pays a monthly benefit of up to 75% of the person’s income. Other types of personal insurance such as TPD insurance cover you should you become disabled permanently.
The other major type of cover is called trauma insurance which will cover you should you happen to be diagnosed with some kind of medical condition including serious illnesses such as cancer, or undergo a procedure outlined in your policy.
Death insurance can be useful for a wide variety of people of different ages but is especially handy for parents with children.
How do you know when you need this type of insurance? Well, the first question to ask yourself is what will happen to your family and your assets if you were to lose your or your partners income. If you don’t have enough money or assets to cover your loan or mortgage repayments, then you should really be looking at taking out a policy.
If something were to happen to you, how would the mortgage get paid, and how would your family pay for the weekly groceries? It really does pay to make sure you have sufficient insurance to cover for your loss of income.
2 Types of Cover
There are two types of cover available for income protection. The first is indemnity value which is the cheaper and more traditional option which is based on your income at the claim time.
This is best for people with a steady income.
The other type is known as agreed value which is the most expensive option. The benefit is paid out on an agreed income and is not affected by changes in income.
This is best for self employed or those with a variable income.