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How much is an Income Protection Insurance Policy going to cost me

Most people who want to buy income protection insurance often wonder how much good policies cost and what are the benefits of these policies. The cost of income protection covers not only depend on the benefits selected but also the waiting or cooling off period, the type of contract selected, if the contract can be cancelled and he amount of cover selected.

The waiting period is one of the most important factors that influence the cost of the policy. By selecting a shorter waiting period such as 1 month, buyers will have to pay a higher premium, compared to a longer waiting period such as 6 months. Most insurance companies allow buyers to select the number of days they want to wait however, cheaper policies may not offer this option.

There are two types of contracts offered to new buyers who want to insure their income. The first type of contract offered is an indemnity contract and this is the cheaper of the two options. The second type of contract offered is the agreed value contract and this is usually the preferred option. Cheaper contracts offer indemnity contracts where as better contracts offer value agreement contracts.

The benefit period, the benefits offered and the insured amount are other important factors that determine the cost of the policy. A longer benefit period such as 5 – 8 years will cost more than a shorter benefit period of 2-5 years. Buyers who select contracts with basic benefits will have to pay lesser than buyers who select additional benefits such as surgery or death benefits, however these days many insurance companies offer 2 or more perks for no additional cost. Good policies offer more benefits, a longer benefit period, an extended cut off age of up to 75 years and a higher insured amount of up to 75%. Some contracts may also offer an additional 8% cover if the policy holder qualifies.

Cheap income protection insurance plans that cannot be customized and have longer waiting periods along with an indemnity contract cost about 2% of the policy holder’s annual salary. Better plans that have a shorter waiting period, that can be customized and offer a value agreement contract cost about 3-4% of the policy holder’s annual salary. Buyers should note that if they want to opt for a good policy but save money on premiums then they should not only look for multiple quotes but also compare these quotes before selecting a policy.

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