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What is Income Protection Insurance

Most people who have heard about income protection insurance for the first time often wonder what is income protection insurance? Like the name suggests, income protection plans provide financially protection to people who cannot work temporarily due to health reasons. These plans ensure that the claimant gets monthly payments for a set number of months or years after he files a claim. Listed below are other details of income protection plans offered in Australia.

Income protection insurance is a specialized type of insurance plan offered to people who want to live without constantly worrying about money. People who are interested in ensuring that their families do not suffer financially at any time, can insure themselves for up to 75% of their gross yearly income. Buyers who are eligible may be offered an additional 8% protection by insurance companies. Buyers are always encouraged to declare all components of their salary package when they apply for a policy since these policies are tax deductible.


Benefits Of Income Protection

When a policy holder cannot work due to illness or injury and he wants to start enjoying the benefits of the income protection plan, he has to file a claim. After the claim has been successfully approved, the buyer will be given a monthly compensation amount. There are two factors that determine the amount received by policy holders. The first and most important factor is the insured amount and the second factor is the type of contract purchased.

Buyers in Australia are offered 2 types of contracts when they want to insure their income. Indemnity contracts are always cheaper than agreed value contracts since indemnity policies do not guarantee how much the policy holder will receive after filing a claim. This means that, after the policy holder files a claim, the insurance company will decide how much to give the buyer after reviewing his current financial status and in case the policy holder’s income has diminished while filing a claim then the policy holder will receive a lower amount. In the case of an agreed value contract, the buyer is informed how much he will receive every month when he applies for a contract.


Types Of Income Protection

If you are still wondering what is income protection insurance then you should note that there are two types of policies offered. Basic policies are cheaper but they offer limited benefits. Better policies or comprehensive policies offer 1 or more additional perks such as a death benefit or a day one claim perk. Some insurance companies also offer additional perks such as surgery benefits if the buyer purchases a comprehensive contract.

Buyers can also get cash backs, rebates, discounts and online deals if they opt for a good insurance company. Buyers who want to save money while getting maximum benefits should consider asking for quotes from multiple companies and comparing these quotes online by using the services of an online insurance comparison site.

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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.