Agreed Value
Agreed Value is a type of Income Protection policy where the monthly benefit is agreed when your policy is taken out, rather than being based solely on your income at the time of a claim.
Agreed Value is one of the ways Income Protection Cover can be structured. When you apply for the policy, the insurer assesses your income and agrees on the maximum monthly benefit that can be paid if you need to make a claim.
Unlike an Indemnity Value policy, where your benefit is generally based on your income immediately before your claim, an Agreed Value policy provides greater certainty because the insured benefit has already been established when the policy was issued. This can be particularly valuable for people whose income fluctuates from year to year, such as business owners, self-employed individuals or those whose earnings vary due to commissions or bonuses.
At claim time, the insurer will still assess whether you meet the policy's claim definition and other conditions. However, because the benefit amount has already been agreed, there is generally less emphasis on reassessing your income to determine how much you're entitled to receive.
Not every insurer offers Agreed Value Income Protection, and eligibility depends on factors such as your occupation, income and the insurer's underwriting guidelines. Your adviser can help determine whether an Agreed Value or Indemnity Value policy is more suitable for your circumstances.
Why It Matters
If your income fluctuates or you're concerned about future changes to your earnings, an Agreed Value policy may provide greater certainty about the level of financial support available if you're unable to work due to illness or injury.
Common Misunderstandings
"Agreed Value and Indemnity Value are the same."
No. Agreed Value generally establishes your benefit when the policy starts, while Indemnity Value usually calculates your benefit based on your income immediately before you claim.
"Everyone should choose Agreed Value."
Not necessarily. The most suitable option depends on your occupation, income pattern, budget and personal circumstances.
"Agreed Value means my claim is automatically paid."
No. You must still meet your policy's definition of disability and all other claim requirements.
"Every insurer offers Agreed Value policies."
No. Availability varies between insurers and products, and not everyone will be eligible.
FAQs about Agreed Value
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It's an Income Protection policy where the monthly benefit is agreed when the policy is established, subject to the insurer's underwriting requirements.
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It may be appropriate for people with fluctuating incomes, such as business owners, contractors, commission-based employees or self-employed individuals. It is also best suited for people who would like certainty at claim time.
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Agreed Value establishes the benefit at the start of the policy, while Indemnity Value generally assesses your income immediately before a claim to determine the benefit payable.
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Not always. Availability depends on the insurer, your occupation, your income and the insurer's underwriting criteria.
Choosing the right type of Income Protection is about more than just the premium—it's about making sure your policy will respond the way you expect if you ever need it. If you'd like to understand the difference between Agreed Value and Indemnity Value Income Protection, talk to a New Vision Financial Services adviser. We'll help you compare your options and recommend the solution that's right for your circumstances.