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Types Of Income Protection

Income protection plans are offered to people in Australia who want to secure their family’s future and ensure that their family does not have to suffer financially when the main bread owner of the household cannot work due to health reasons. Listed below are details of the types of income protection plans offered to buyers.

Long term and short term plans – Based on the tenure, these plans can be divided into 2 categories. Long term plans have tenure of more than 15 years where as short term plans are usually valid for 10 years or lesser. Buyers have the choice of deciding the tenure provided they select a good policy that is flexible.

Indemnity and agreed value contracts – Based on the contract type opted for, income protection insurance plans can be categorized into agreed value and indemnity contract. Indemnity contracts do not guarantee that buyers will receive a fixed claim amount since the buyer’s financial status at the time of making a claim affects the amount received. Agreed value contracts on the other hand ensure that buyers receive a fixed amount every month and buyers are informed how much they are going to get after filing a claim at the time of applying for the policy.

Basic plans and good plans – Based on the benefit period, insured amount and benefits offered, these plans can be categorized into basic or cheap plans and good plans. Basic plans only offer monthly compensation and possibly 1 additional benefit where as good plans offer a death benefit, day one claim benefit, an extended benefit period, choice between types of premiums and choice between monthly or yearly payments. Buyers may also be offered 1 or more, free perks if they opt for good plans from reputed insurance companies. Good plans cost slightly more than cheaper plans since good plans ensure that buyers get maximum protection and maximum benefits.

Stepped premiums and levelled premiums – Based on the premium type, there are 2 types of income protection insurance plans. Buyers who opt for good plans are usually given an option to choose if they want to pay fixed premiums every month or stepped premiums. Buyers who opt for stepped premiums will be able to pay low premiums for the first few years and then will have to pay higher premiums as they grow older. Buyers who opt for long term plans and opt for levelled premiums may be asked to pay a higher premium amount after they turn 50.


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Income protection is a crucial part of any comprehensive financial plan. If you’d like some help customising the correct policy for you, or want to know more about the income protection insurance benefits.