Income Protection Insurance and Pre – Disabilty earnings
Income protection insurance is set to provide any policyholder with income if there is any event that he/she becomes incapable of working due to a major injury or a long-term sickness. The insurance product is a must especially for people who have no other means or source of income other than employment. Before you decide to buy any income protection insurance, it is advisable that you first know and understand all significant provisions, especially those pertaining to pre-disability earnings.
Of course, the primary concern you should have is about the premiums payable corresponding to the specific type of life insurance policy you take. Other than that, you surely are very curious and particular about the amount of claims or payouts you could receive should the insurance take effect due to an abrupt loss of income (or capacity to earn income). This is where pre-disability earnings should be most important.
In general, ‘pre-disability earnings’ is defined as an amount of the employee’s salary or wage that was in effect before the start of the disability. Logically, income insurance policies refer to pre-disability earnings when benefits payable are calculated especially under partial disability. Thus, you should make sure the product’s definition of the phrase (found in the terms and conditions documents of the policy) covers a broad period before onset of disability. This is to make sure it would not be lower than the policy’s outset.
It is ideal that your pre-disability earnings as of the month before the onset of disability be carefully noted of and adopted in the policy. You have to make sure the payout you would receive is at par with the regular income you used to take when you were still capable of working at full capacity. The amount should also likely consider the possible increases in income that you could be receiving if you were still working at the time of policy effect.