Income Protection is designed to supplement up to 75% of your income should you be unable to work due to illness or injury. The amount you receive at claim time is dependent on whether you have taken up an ‘Agreed Value’ or an ‘Indemnity Value’ contract.

Agreed Value

Where you have nominated an agreed value income protection policy, your benefit is based on your income at time of application. The advantage of such a contract is that you know the cover amount you will receive if a claim is submitted, regardless of any fluctuations.
This type of policy attracts a higher premium and could be seen as more suitable for the self-employed or those with a fluctuation income.

Indemnity Value

When an indemnity value income protection policy is elected, your benefit payment is determined at the time of the claim based on your highest average monthly income over a defined period of time, prior to your disability. The applicable time period differs between insurer’s, usually anywhere between 12 and 36 months.

This type of policy is suitable for PAYG or regular salary earners where their income is more consistent and unlikely to fluctuate.

Agreed verses indemnity in terms of income protection can be likened to Agreed versus Market value when it comes to motor vehicle insurance. You can either agree on a value that you would like to receive if your car is written off or just accept what it is worth in the market at the time of the accident.