Income Protection Insurance is an essential insurance policy for your financial security. The reason for this is if you ever get injured or ill and cannot attend work, you could receive an insurance up to 80% of your salary.
With this payout, you can easily pay rent, mortgage, and cover most of your expenses. The premiums of income protection insurance are rising day by day, but how to make income protection quote affordable? It is possible to reduce income protection premiums without giving up too many benefits.
Here are a few essential tips that will help you get the best value for money from income protection insurance. Let’s get started.
Deduct Tax
One of the benefits of Income Protection Insurance is that the premium is tax-deductible. This can be a significant point of interest for both employed and self-employed workers.
If you pay your premiums personally, you can claim a tax deduction on it. You can almost receive half of you premiums depending upon your income level and marginal tax rate.
However, the payouts that you receive at the time of your claim will be treated as your income. The amount you receive from an income protection policy will be taxable.
Types of Income Protection Insurance
Generally there are two types of Income Protection: Indemnity value and agreed value. In Indemnity value income protection, the payment of your benefit is based on the salary you declared while buying a policy. Whereas, In Agreed Value Income Protection Insurance, you have to prove your income while claiming.
Indemnity policies are 20 percent cheaper compared to agreed value cover. Getting an Indemnity policy is one way to keep costs down. You will have to provide financial evidence to claim indemnity policy, which is not necessary in agreed value policy.
Waiting period
The waiting period is another factor that plays a vital role in the cost of your premiums. The waiting period can be short as a day too long as 120 days. The short waiting period is great, but it comes with a price.
If you want to payout immediately after you are ill or injured, your premiums are going to be high. Increasing your waiting period from 14 to 30 days can reduce your premiums by 40 percent.
Factors to consider while selecting the waiting period would be your sick leave, your spouse’s income, your savings and investments, and whether you could receive support from your relatives until the insurer pays you.
Shop Around – Different companies have a different rate
There are many insurance companies in the market with varied pricing factors because of which there is a large variation in pricing.
Some of the factors that affect the cost of the income protection premium which you can’t change are your age, gender, medical state, occupation, and state where you live. Insurance agencies treat these factors differently.
Shop around various agencies, know the benefits they give, and finally, buy an income insurance policy.