The type of contract
- An indemnity option policy (generally) pays the lesser of
the monthly insured benefit or 75% of the best 12 consecutive
months income from the previous three years. The payment under
this option is taxable, but the premiums are deductible.
- With an agreed value option the insured benefit is agreed at the time the policy is
established. While the tax treatment of this option is open
to debate, the payment under this option is not generally taxable,
and therefore the premiums are not deductible.
Disability and Benefit Definitions
Insurers' definitions of these terms do differ. Review your insurer's
definitions for total and partial disablement, and for the benefits
payable under each scenario. These are the most important terms
in any policy.
Benefits generally become payable after four weeks, but a waiting
period of up to 13 weeks can reduce the cost of premiums considerably.
Ensure that your benefit increases with the rate of inflation
- both while your policy is in force and while you are on claim.
There are many other benefits and options attached to income protection
insurance. These range from booster benefits, through to assistance