Types of Income Protection
· The Indemnity value ; with this type of cover, you are required to show proof of your income at the time that you apply for IP, however at the time of claim, you will be requested to provide documentation which shows proof of your income. The value of your monthly payment is bound to 75 percent of your gross income or the sum insured whichever is the lesser amount.
· The Agreed value policy; with this sort of cover, you provide proof of income during the application, and you won’t be required to provide income proof at the time of claim. This also means that regardless of a decrease in your income, you are paid the agreed monthly benefit. The premiums of agreed benefit are approximately 20 percent higher when compared to Indemnity value income protection policies.
The cover that you should choose ultimately comes down to your personal situation. Agreed value income protection policies are likely to be beneficial for those such as self-employed persons who may have fluctuating income or females who are likely to have children in the future and take maternity or unpaid leave and when they return to the workforce, they may rejoin with a lower income. Indemnity value income protection policies are generally cheaper although if there is a decrease in your income, it allows your insurance companies to also reduce the benefits you receive at the time of claim.
At IncomeProtectionOne we have advisers available to help you make the right decision for yourself, we can help you understand each of the different policies and how they may relate to your personal situations. We can also provide assistance through the application process.