When it comes to Income Insurance, the fine print matters, here are a few key areas to consider when getting your Income Insurance sorted.
GET AN AGREEMENT FROM OUTSET
There are a few policy types but you can bring them down to three core categories which are Agreed Value, Indemnity Value and Loss of Earnings but in this article, we will look at Agreed Value and Indemnity Value.
Firstly, an Agreed Value policy means that you and the insurer agree to an insured amount when you take the policy out, so at claim time you will not have to prove your income, because it has already been agreed to from the outset.
The Indemnity Value Income Insurance product makes it easier to get your insurance when you take it out because you don’t have to prove your income at that time, and if you are self-employed, you will know how much effort it is to get your financial accounts updated from your accountant.
An Indemnity Value Income Insurance product may seem easier at the time you take out your policy. However, with an Indemnity Value, you will have to gather all this information at claim time. So either way, you are going to have to prove your income.
It just makes sense to get all that sorted at the start. The last thing you are going to want to do when you are not able to work is run around and get all your financial accounts together and wait for your accountant to update everything before you can put in a claim.
It’s much less stressful to do it when you are healthy and can get this information together.
AGREED VALUE INCOME INSURANCE
Agreed Value will also give you the certainty of what you can claim because you agreed to an amount from the outset.
With Indemnity, since you will have to prove your income at claim time, it may be an issue, especially if your income has been much lower than expected. With an Indemnity Value Income Insurance policy, how much you can claim will depend on your taxable income at claim time.
With Indemnity, the insurer will only pay a percentage of your insured amount or a percentage of what your taxable earnings are, whichever is the lesser.
WHAT IS YOUR OCCUPATION CLASS
Your Income Insurance can follow you, wherever you go. If you change occupations, that’s no problem. You will be able to keep the same terms from when you took your policy out.
Most insurers will also let you change your occupation class to reduce premiums.
For example; at that time you took your Income Insurance out, you were a labourer/builder and assessed as a Class 3 Occupation, then you changed jobs to an office worker.
Depending on what your office duties were, you could apply to the insurer to have your occupation class reviewed, on the basis that you are now in an occupation that has slightly less risk of being injured.
Most insurers will review your policy, adjust your occupation class accordingly, and therefore reduce your premiums.
Here is the importance of regularly reviewing your cover and making sure your insurance cover is relevant to your needs and is kept up to date with any life changes.
WHAT IF YOU ARE PARTIALLY DISABLED
It is essential to understand that if you had an Agreed Value or Indemnity and you were partially disabled then you would need to provide the insurer with evidence of income to enable them to assess how much partial payment you are entitled to and they can only do this if you provide them confirmation of your partially reduced income.
You should regularly review your Income Insurance because life changes, and you should make sure your cover changes with you.