When you start working the term ‘income protection’ can pop up now and again. It is something that you should consider when you are earning an income so that you are protected when your source of income happens to run dry due to not being able to work. Here is a basic guide to seven things you need to know about when it comes to income protection.
1. It covers up to 75% of your income
Income is your most valuable asset as a working person. It provides peace of mind if you are unable to work due to illness, injury, temporary or permanent disability. It helps you to focus on getting better without the headache of how you are going to pay bills and sustain your loved ones. An income protection policy covers up to 75% of your income. Some insurers allow an additional 15% cover which is normally linked to your superannuation.
2. You can find a policy that caters to your specific needs
We all differ in terms of how much we need to cover our monthly expenses, so why should you be blanketed under a one-size-fits-all policy? You know have the ability to find a policy that will match your situation and your budget without causing you to scramble for money to patch up your finances in order to keep your family above the bread line.
There are various benefits that come with different policies that you can tailor make to suit your needs at the right price. The catch is that if the cost outweighs the benefits then you should probably move on to another cover that is affordable.
3. Are you covered by it if you are made redundant?
Unfortunately, if you are made redundant, your income protection plan will not cover you, but there is no need to despair as there are alternatives. You can purchase a Premium Waiver for Involuntary Unemployment feature as an add-on to your policy. Speak to your insurer to ask if this feature is provided along with your policy.
4. Make your salary keep up with the inflation rate
To have full peace of mind you will have to look at the features that come with the policy you are taking out. Check to see if your income protection policy keeps up with the inflation rate, for the period you have set it for, both before and after any potential claim.
5. Know what type of policies you can choose from
Keeping up with its flexibility of tailor making a policy, you will have to consider what type of policy you want before you sign up. Before you make your choice, you will have to consider how each type will impact you when it’s time to make a claim. There are mainly three which are agreed value, indemnity value, and guaranteed agreed value.
6. Bundle up
If you want to link your income protection to other policies such as life cover, Total and permanent disability insurance (TPD), and trauma. This will make it easier in terms of managing your payments for multiple policies under one.
7. There are waiting and benefit periods
When looking at the features of your income protection cover you will find that there are various features that come with it. It’s important that you check these features to see if they will cater towards your situation.
There is a waiting period in which you will have to wait for a defined period after you made a claim to start getting compensation after you have sustained an accident or injury before you receive a benefit.
Your benefit period is basically the length of time that your policy will pay out your income. The time frame will be decided upon by you which can be between 2 or 5-year policy. You can also extend the policy up until you are 65.