By Declan Yin // in Finance


When comparing income protection insurance, you will need to be diligent and on your toes. Not all policies are created equally, and not all insurance companies have your best interest at heart. The agents will know exactly what is in the contract that you are about to sign, even if you do not. One important thing that you need to remember is to read the entire policy, including any riders or fine print that has been included.

Other than that, there are a few things that you need to watch for to make sure that you do not fall into one of the traps that insurance companies have become famous for.

  1. What is covered?              

    You need to know exactly what is covered. Each policy will be a little different so check into it. If you have any doubts, or concerns, contact their specific customer service and get some answers.

  2. Claim Pay Out-               

    If something should happen and you need to file a claim you may not get as much money as you need to pay your basic bills, let alone anything else. Most companies will go back 12 months from the time of the claim and make an average. Along with that they will only give you a percentage of your wages earned, up to 85%. Find out how much they pay out, how often, and if there are caps.

  3. Premiums-           

    Find out how much your premium will be right now. If your cost will go up yearly, monthly, or never, you need to know before you commit to a contract.

  4. Non-Cancellation Policy-                 

    You need to consider getting this type of policy otherwise the insurer has the right to reevaluate you every time that your payment cycle starts over. They can raise your premium, or even decide that you are no longer healthy enough for them to continue covering you. Do not fall for the trap of getting an income protection policy, thinking that you are set until you retire, just to find out the agent has dropped you. Now you will have a challenging time finding a policy, and if you do, it will cost you a pretty penny.

  5. Guaranteed Future Insurability-           

    Get a policy that has this so you can raise your benefits at any time without having to go through the qualification process again. As you know, the older you get the more health problems you will have, which the insurance company will hold against you.

  6. Offset clause-           

    If possible, find a policy that does not have this clause added into it. This allows the insurance company to lower the payments that they give you if you have other income coming in, such as sick or vacation pay.

  7. Payout Type-                There are a couple separate ways in which you will qualify for your claim. The first is if you are not able to do the job that you are presently at, which is the policy that you want to get. The other one involves getting payment only if you are not able to return to any type of work. Avoid this type at all costs.
  8. Wait Time-

    Insurance carriers will always have a wait time. This is the length of time that you must wait before being eligible for payments. Some of them will have you wait a few weeks, while others will have you wait a few years. Make sure you go for the shorter time period policies otherwise they may be a waste of money.

  9. Limitations-

    Double check the policy to see what the limitation are. What any of the limitations are. Many companies will put a cap of two years on partial disability and mental health issues, so be aware of them, and avoid them.

  10. Restrictions-

    Watch for any policies that have restrictions. They may say that you can only qualify for a payout if you become partially disabled. This leaves it open for interpretation on their part if something should happen.

These ten traps can be avoided as long s you pay attention to what you are signing when you get the policy set up. Never trust the agent’s word for anything. Read the policy and make sure that you understand, and agree with, every part of it. If you are unsure about something, ask. If the policy does not fit what you are looking for, move on to the next option.

About the author, Declan Yin

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