Cheap and premium plans
If price is taken as the main factor, then income protection insurance plans can be divided into two categories. Cheap plans are offered for as less as $7 a month whereas premium plans are offered for $15 or more every month.
The main differences between these two types of plans are the benefits offered and the type of contract provided; however buyers may also notice different waiting periods and benefit periods being offered for each of these plans.
There are a few benefits of opting for cheap plans; such as getting protection while you are on a budget or getting tax benefits without spending a lot of money however; usually cheap plans tend to have more limitations than premium plans.
Premium plans are offered to those buyers who want peace of mind at all times knowing that they will get maximum compensation payments with a large range of additional benefits.
If the benefits offered are taken as the main factor then, income insurance plans can be divided into two categories. Basic plans are also known as cheap plans due to the limited number of benefits they offer.
Basic plans may be ideal for those individuals who want to try out income insurance without spending too much at first or for those buyers who are on a budget. Basic plans do not offer many additional benefits; in fact buyers can expect only limited compensation payments with such plans.
Comprehensive plans are also known as premium plans since these plans offer many additional benefits. Buyers who opt for comprehensive plans can expect to get a maximum of 75% of their yearly pre-tax income towards compensation payments and in addition, buyers may be offered some free benefits such as rehabilitation costs benefits, accommodation benefits and transplant or cosmetic surgery benefits.
While some insurers may offer a death benefit or a day one claim benefit complimentary, other insurers may charge a nominal fee for these benefits.
If the type of contract is taken as the main factor then income protection insurance plans can be divided into two categories. Indemnity contracts are generally offered to buyers who want cost effective contracts.
Agreed value contracts on the other hand are generally offered to buyers who want maximum protection and need a flexible plan. While indemnity contracts are considered sufficient for those employees who earn a steady income every year; agreed value plans are considered a must for self-employed individuals who earn a fluctuating amount every year.
Buyers who are interested in purchasing indemnity contracts should note that the compensation payments they receive will depend on various factors such as how much they earned while purchasing the contract.
If buyers are given a choice between agreed value and indemnity contracts then the amount they earn along with the stability of their income flow should be taken into consideration before a final decision is made.
While insurers try their level best to accept all applications and do this quickly, buyers may have to wait for a few days to a few weeks if there are problems with their application. Usually insurers contact buyers right away and inform them if they need to undergo blood tests or answer a questionnaire before their policy comes into effect; but buyers should keep in mind that their policy does not come into effect until the insurer informs them.
Once the application is accepted, the policy holder can expect to receive a detailed product disclosure statement that will help him understand the terms and conditions of the contract. This legal document will also elaborate about the fee structure, premium loading fees if any, exclusions if any or any other important terms to keep in mind.Policy holders must make it a point to go through this document and understand their contract with the help of a financial advisor, insurance agent or insurance advisor.
Buyers who want to enjoy tax benefits should also research about the tax implications of purchasing policies online or through their super funds. As a general rule both standalone plans and superannuation plans offer tax benefits; however the exact details of the benefits offered will depend on the plan you choose or the super fund you are a member of.
The benefit period of the contract refers to the number of years the policy holder is entitled to receive the benefits offered by the selected insure. While some insurers may offer flexible plans with a benefit period ranging from 2 years – 5 years, other insurers may offer a fixed benefit period for cheaper plans with limited benefits. Choosing a longer benefit period tends to increase the monthly premiums by a few dollars however; choosing a shorter benefit period tends to restrict the number of claims you can file in a short period of time.
Buyers who want to purchase either a standalone or superannuation income protection insurance plan have to wait for a certain number of days before they can go ahead and file the first claim. This period is often known as the cooling off or waiting period.
The waiting period not only allows the buyer to change his mind and back out of the contract if this option is provided but also helps insurers keep premiums low for all buyers.
The waiting period is usually flexible which means that the buyer can decide at the time of purchasing the policy if he wants to wait for 14 days, 30 days, 60 days, 90 days or more to file the first claim. Buyers who opt for a day one claim benefits can file claims before the waiting period is over; however it should be noted that in most cases, the payments towards the claim will only be given when the waiting period is over.
Buyers should note that choosing a longer waiting period tends to lower the premiums by a few dollars every month but doing so will also prevent you from getting financial help from the insurer for a longer period of time.