Income protection insurance insures policyholders against sudden illnesses of accidents that leave them unable to work at the same level as before their accident. The inability to work falls into four different sections: own occupation, suited occupation, any occupation and activities of daily living.
Own occupation refers to a job that the policyholder had before their unexpected illness or accident and are no longer able to perform. Suited occupation means that the person cannot work a job that they are suited forbased on their education orwork experience because of an illness or accident. Any occupation is when a person is not able to work any type of job at all due to an illness or accident. And, activities of daily life refers to people not being able to perform basic life functions such as eating, dressing themselves, walking up stairs and so on. The policy will state all of the daily activities.
Each one of these four categories varies in price. Own occupation will have the highest premiums while activities of daily living will have the least. Another thing that you must find out about is the restrictions of your contract. Each insurance company haslimits to covering their clients. For instance, if you are incapable to work due to drug abuse, self-harm, or an attempt at suicide you will not be covered.
When looking for the right income protection insurance you have to find out what limitations the company has. All contracts will have limitations such as benefit limit, proportionate limit and deferred period.
With a benefit limit not all of your salary will be replaced. Instead you will receive around fifty to seventy percent of your salary. If you make a lot of money you can have a set amount stated in your contract to ensure you don't lose out on half of your salary. With a deferred payment there is a period of time from which your claim was settled to when the insurance company will pay your compensation. You can choose the length of time when you sign the contract. Proportionate benefit is for people who are able to go back to work, yet can't perform the same job as before and will lose salary as a result. The insurance company will compensate the difference of the new salary and the old salary.
The premiums for income protection insurance can vary depending on many factors. The premiums will be set in the contract and one of the most important things insurance companies look at is the risk profile of the occupation of the insurance holder. The more dangerous the job the higher the monthly premiums will be. Jobs such as miners, loggers, pilots, and many more are considered high risk and will make the premiums skyrocket. But if you decide to change your job during the length of the contract the premiums will go down, assuming you get a less risky job.