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When comparing income protection policies, an adviser can correctly tell a client that… (i) income protection generally replaces part of a person's income for a benefit period after a waiting period. (ii) a longer waiting period usually means a higher premium.
Statement (i) is true: income protection pays a monthly benefit, typically a percentage of income, after a waiting period and for a set benefit period. Statement (ii) is false: a longer waiting period usually lowers the premium, because the insurer pays for a shorter time. Explaining these trade-offs helps the client understand the costs and risks of the cover (Code of Ethics Standard 5).
Longer waiting periods trade earlier cover for lower premiums.
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