Income protection provides what is called an indemnity and that is a monthly payout to the policy holder.

As with any insurance policy, the individual pays a premium in return for income, when said individual can no longer work.

So what is the difference between this type of income protection and any other disability insurance or unemployment that pays workers that have become disabled and are no longer able to work. Needless to say, those systems that are in place have to first be offered by an employer. There are many wage earners who are not provided this benefit as a contingency of employment. Additionally, income protection best serves those individuals who are self-employed or own their own businesses and cannot defer to any company benefits in the event of a job loss because those persons are the company. There are other systems in place such as short term disability benefits that are offered by the Government but the Government does not guarantee benefits or the application process is so lengthy it could weeks, even months before a person can start to receive benefits. This is not a good option for someone who needs immediate income for everyday necessities like food and mortgage payments. Unemployment insurance is also not guaranteed to an employer who lost their because of a disability; unemployment insurance is most helpful to individuals who lost their job due to company error (i.e. a layoff).

Income protection provides what is called an indemnity and that is a monthly payout to the policy holder. These monies are typically a fixed percentage of the policy holder's income at the time of a disability. This type of insurance policy can be purchased separately; as its own entity or as a rider for other financial obligations such as mortgages, credit cards, and even car loans. In regard to a rider on a financial agreement, any outstanding payments are suspended until such time as the policy holder becomes gainfully employed. There is also no penalty associated with the suspended payments.

At the inception of the opening an income protection policy the interested individual is provided with two options: income protection in the event of a job loss due to a disability or income protection against the inability to work in his or her chosen field. What the latter amounts to is if a field is experiencing a hiring freeze or the industry to which you are proficient in and you have most of your adult experience is no longer hiring in your area (e.g. factory workers whose employers have either folded or relocated operations). It is also important to note that with income protection, there is what is called an elimination period and this is a period of time in which benefits are not provided. In terms of the costs of the policy, this is contingent upon a few factors, chief among them is the elimination period. A longer elimination period generally means a less expensive policy. It is important when selecting an income protection policy to determine how long you can go without any additional income. For example, if you have a significant amount of savings, you may be able to go last through a six month elimination period. Conversely, if you have very little emergency funds a 30 or 60 day elimination period may be more suitable.

Prior to income protection benefits being awarded or paid out, the policy holder will need to provide documentation to the insurance company verifying that he or she has a disability that precludes them from working. Pre-existing conditions for the most part are not covered, neither are disabilities that are the result of negligence. However, the terms of a policy can vary.

There are a number of different providers offering income protection insurance and the different plans on the market do have many different options and criteria built within them.