The Finer Detail
Like with any insurance policy, the finer details are the most important. When considering income protection insurance, there are different types of premiums to consider: Reviewable, Guaranteed, Age-related.
One of the most preferred, for it’s reliability, is a guaranteed policy as your premiums won’t unexpectedly rise. This won’t always appear to be the cheapest policy on the face of it, but if you are planning to have income protection insurance over the longer term, this could work out to be much more cost-effective.
Reviewable policies will appear initially cheaper, however due to the nature of the policy, premium increases can be expected once out of your initial defined period. Age-related policies will also appear to be cheaper, but the premium will increase as you get older. The premium increases for age-related policies won’t come as a surprise as they will be outlined from the beginning, however, when considering your future financial planning, compared to a guaranteed policy, you may end up worse off.
Another area to pay attention to when considering income protection insurance is policies that are “own occupation.” Own occupation policies refer to insurance that will cover the holder if they are too unwell to carry out any part of their job. Therefore, for people considering this type of policy, it is important to get the definition of your occupation correct the first time.
Other policies can cover “any occupation” but there is an increased risk as there is less likelihood of a payout. For instance, your policy will only payout if you are unable to carry out daily living activities, so if you are in a job involving manual labour and you suffer a broken bone or sprain, your policy may dictate that you can still carry out other actions, such as working at a desk, even although you are not able to carry out your existing job, and therefore will not pay out.