Income Protection Insurance-An introduction

Some people invest a fixed portion of their income from time to time. If you are one of them, then income protection insurance is something that you will need to pay attention. It will help you save your income in many ways. One of the major strong points of the policy is that it pays to those policyholders who have been disabled by ailment or accident. Under such circumstances, incapacity is defined in four tiers-own, suited and activities of daily livelihood occupation. All these tiers will define what tier the disabled person belongs to. There are benefit limits that define the exact proportion of your total income that you will receive.

One thing that you need to take note is that this is a valid claim. For instance, you take a few months leave due to a medical problem and received disability benefits. Insurance experts are of the opinion that there is a deferred period, the time span between a valid claim and the start of benefit payments. However, there are some restrictions related to income protection insurance. You will receive monetary benefit from such a policy only if you fail to work due to accident or illness. Your insurance service provider will replace around  75% of your total income under normal circumstances.

Income protection is primarily of two types- protection that comprises indemnity(offered by superannuation funds), and agreed value(pays out the benefit agreed to reflect your income during the initial phase of your policy). There is no impact on agreed value  by income fluctuations and is the costliest alternative. In comparison, superannuation funds are cheaper and provide fewer features and flexibility.

One thing that you will need to keep in mind is the fact that you will  get paid only until the time you can resume work, retire, die or end the policy term. The payment process starts once your sick period gets over, or after some other insurance stops covering you. The longer you wait, the lower will be the amount you will receive as monthly payments. This policy covers most ailments that may render you unfit to work. Moreover, you can claim as many times as you may need to as long as the policy lasts. However, it is different from critical illness insurance, through which you will be paid a lump sum at one go if you have a serious illness.

You can find out how much you require by calculating your monthly expenses. An income protection insurance policy will provide you with income to cover your monthly expenses. Staying well informed before purchasing a policy would be in the best of your interests.To do so, you need to read the terms and conditions of the policy minutely before signing.