Articles

Indemnity VS. Agreed Value

Income Protection

Finding the right Income Protection Insurance policy that fits your personal needs and circumstances is not as easy as just picking the first option you come across.

Not only do you need to consider the different policy types but also the different benefit periods, waiting periods, disability definitions and taxation issues.

If you're thinking income protection there are two policy options available:

Indemnity

With an Indemnity income protection insurance policy your benefit is generally calculated as a percentage of your income at the time of claim.

An indemnity policy will generally pay the lesser of the insured monthly benefit which is 75% of your income or the best 12 consecutive months in the last three to five years depending on the insurer.

Why Indemnity?

If you have a pretty stable income that doesn't fluctuate then choosing an indemnity policy will be cheaper compared to an Agreed Value policy.

Indemnity policies are competitively priced compared to Agreed Value policies because your monthly benefit is calculated and certified at claim time instead of upfront when you start the policy.

If you're an employee with a constant income than indemnity Income Protection Insurance policy can save you a bit of money compared to an agreed value Income Protection Insurance policy.

Agreed Value

An Agreed Value income protection insurance policy has a fixed monthly benefit which is calculated and approved when your policy is setup. Agreed Value policies will pay you the fixed insured monthly benefit, regardless of whether your income is lower at the time of claim.

Why Agreed Value?

An Agreed Value policy has an insured monthly benefit that has been certified by the insurer at the time your policy is setup.
This will give you certainty and peace of mind when and if you make a claim.

Agreed Value premiums tend to be a bit higher than indemnity policy premiums but it's worth paying that little bit extra for peace of mind at claim time.

If you have income that goes up and down like a yoyo (self‐employed or contractor), an Agreed Value policy will provide you with a fixed monthly benefit if and when you need to make a claim.

If you're looking for the income protection plan give us a bell, our expert team of income protection insurance specialists will help match your needs with the right cover options.

For more information about how we can help find you the perfect life insurance or income protection policy for your particular circumstances, please call our friendly team today on (02) 9745 2740.