What You Should Know Before Purchasing Salary Protection Insurance
Many people assume that life insurance is all the protection they need against unforeseen events, but the most basic life policies will only pay after death or complete disability.
The possibility of illness or an accident preventing you from working temporarily is a much more likely scenario.
Income or salary protection insurance is meant to help replace your income should something happen that would prevent you from earning a living.
When your ability to work is compromised, your ongoing expenses will probably remain the same, and it ensures that you can still meet your mortgage repayment, household expenses and other regular financial demands. In case of illness, you would probably have to pay for expensive medical or rehabilitation bills, which may also be covered in your income protection insurance.
A monthly payout known as indemnity that is fixed as a set percentage of your income is provided and is usually restricted to 75 percent of your gross salary.
Salary protection policies are complex products and policy definitions of various insurers could differ greatly. One important definition to compare between policies is that of total disability. When you purchase this type of policy, you can choose between insurance that covers you in the event that you are unable to perform any kind of work, or one that covers you in case you are simply unable to work in your chosen occupation. The latter is usually more expensive since most insurers prefer policyholders taking on some kind of work if they can.
The amount you will pay for income protection insurance is also influenced by the waiting period or excess. This is the length of time before you begin receiving indemnity or the minimum period you need to be off work before you receive your first payout. The waiting period could be from 2 weeks to 2 years, but a longer elimination period makes for a cheaper policy. The length of your waiting period will usually be dictated by the amount of funds you have in savings.
The benefit period is the amount of time for which you are covered, which could range from 6 months to age 65. Claiming benefits could also be escalated due to inflation. As a policyholder, you will need to meet certain criteria before receiving the insurance benefits. For instance, you will need to prove that you have become disabled and that the disability is included in the salary protection policy. Note that previously existing conditions and disabilities resulting from negligence are not covered. Visit us For more information regarding insurance benefits. Read: How To Negotiate A Mortgage Payoff
Another major factor influencing the amount of premium is your occupation. White collar workers are generally charged lower premiums than blue collar workers, largely because of the lower risk of injury. In fact, very few insurance companies offer insurance to certain occupations including actors, models, pilots, bicycle couriers and members of the armed forces. While your premiums will largely depend on the income insurance cover you choose, they are usually tax-deductible and the after-tax cost could be significantly less than the cost of the premium.