Income Protection Cover protects the greatest asset a person can have i.e. power to earn/ generate income to support himself and the family.
It is an inflation adjusted benefit that is the event of being unable to work in your own occupation for more than 10 hours per week, due to sickness or accident, provides a monthly replacement income.
Income protection insurance provides you with a monthly payment to replace lost income if you are unable to work because of sickness or injury. Some policies will cover up to 75% of your pre-tax income. Payments are made on a proportional basis equivalent to your loss. Many policies also include comprehensive rehabilitation and other benefits to help you get better sooner.
You generally need to be in the paid workforce to be eligible for income protection insurance (through some companies do offer cover for housewives and househusbands). Benefits are based on a proportion of your actual income and offsets often apply.
Premiums vary according to waiting periods, gender, smoker, non-smoker, age and occupation.
There are two main types of income replacement products:
1. Indemnity The final claim payment amount is determined by what you are earning at claim time.
2. Agreed Value The claim payment is agreed at time of policy issue.
It is 55% of the pre- disability income earned at the time of application. All income protection claims that are paid have CPI increase on each policy anniversary year if the client is still on the claim.
Self-inflicted harm including attempted suicide, alcohol or drug abuse.
Pregnancy or complications arising from the pregnancy unless the disability lasts more than 90 days after the end of the pregnancy.
Participating in a criminal act.
Income Protection Covers are generally taken as an Indemnity or Agreed Value Products.
Where the law of surrogation states that one should not make a profit out of disability, hence the Income Protection Cover a person can avail is either 55% of pre-disability income at Agreed Value or 75% of pre-disability income at Indemnity Value.