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Income Protection

Income Protection insurance provides a benefit of generally up to 75% of your taxable earnings if you are unable to work due to illness or injury.

Premiums vary depending on occupation, smoking status and age and are generally tax deductible and benefits received are assessed as income.

An Income Protection benefit is usually paid on a monthly basis after the completion of a waiting period and is generally payable to the policy owner who is usually the insured.

What can the proceeds be used for?

The proceeds from an Income Protection insurance policy could be used to provide for expenses including home loan repayments, personal loans, bills and general living expenses.

What are the features of Income Protection insurance?

There are some key features of Income Protection insurance which may need some consideration:

1. Benefit Period which is the maximum time that any one claim may be paid, standard benefit periods offered are 2 years, 5years, and to age 65 years. There may be some restrictions to the maximum benefit period offered due to occupation. Generally the longer the benefit period the better but also the most costly.

2. Waiting Period refers to how many days you have to wait to be eligible for a claim to be paid, standard waiting periods include 14 days, 30 days, 60 days, 90 days and 1& 2 years. Generally the shorter the waiting period the better but also the more expensive.

3. Agreed Value or Indemnity, this refers to how your benefit is calculated in the event of a claim. With Agreed value the monthly benefit paid is usually agreed at the commencement of policy based on financial evidence provided. With Indemnity the amount paid for an Income Protection is claim based on the insured’s income at the time of claim. Generally agreed value will give you more certainty for those who income varies year to year. Indemnity could be adequate for those who income remain consistent or continues to increase.

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