Income Protection Comparisons

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Indemnity Value vs Agreed Value Income Protection Insurance

Agreed Value

The monthly sum insured for an Agreed Value policy is derived from your gross income at the time your policy commences. This is especially beneficial for self employed workers (or business owners) as their income can fluctuate and may have dropped prior to making a claim.

Why does this sometimes happen? Sometimes when business is getting tight and not as much income is coming through the door, the owner (you) can get stressed and distracted, which can lead to a drop in you health and/or increase chance of an accident, which in turn can lead to an Income Protection claim.

Therefore, under Agreed Value any drop in income will not affect your income protection sum insured amount because it was 'Agreed' as financial evidence was provided and confirmed when you applied for the cover.

Indemnity Value

The monthly benefit in an Indemnity Value policy is derived from your gross income at the time of claim (i.e. it is restricted to the sum insured or 75% of your income 12 months prior to claim, whichever is the lesser).

This is not usually a problem for most employees as their income usually always increases. These Indemnity Value policies are generally cheaper than Agreed Value policies.