Income Protection

Income protection insurance also referred to as salary continuance is simply a regular payment made to you should you become disabled or sick.

Similar to life insurance, premiums are affected by factors including your age and smoking habits, however, with income protection insurance premiums are also affected quite significantly by the type of work you do, eg. blue-collar versus white-collar.

Premiums will also be affected by such things as a waiting period and the percentage of usual salary you want to insure, eg. the shorter the waiting period, the higher the premium – the larger percentage of salary covered, the higher the premium.

The maximum percentage of salary that insurers will cover is 75%. Waiting periods vary between 14, 30, 60, 90, 120, 365 and 730 days. The waiting period is simply the time during which the insurer won’t pay you. Only when you have been sick or ill for this period can you make a claim.

The length of benefit period is also important and again affects the premium for a policy. The payment period can be one year, two years or a longer period but will generally cease by age 65.

Income protection insurance is most appropriate for the self employed, those who primarily earn commission on sales and also for wage and salary earners with limited sick leave provisions under their employment.

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