What is an indemnity period and how does it differ from the benefit period?

The indemnity period and benefit period are related but distinct concepts in Income Protection insurance, though they're sometimes confused or used interchangeably. The benefit period is the maximum length of time the insurer will pay benefits if you remain continuously disabled - for example, 2 years, 5 years, or to age 65. The indemnity period refers to the basis on which benefits are calculated for indemnity-style policies, typically averaging your income over a defined period (usually 12 months) immediately before you became disabled. However, in some policies, 'indemnity period' is used to describe the benefit period, adding to the confusion. The key distinction is that 'benefit period' always refers to how long benefits will be paid, while 'indemnity period' may refer to either the calculation period for determining your benefit amount or, in some policy wordings, the payment period. When reviewing a policy, clarify these definitions in the Product Disclosure Statement. The important questions are: How is my monthly benefit calculated? (agreed value, or based on recent income), and How long will benefits be paid if I remain disabled? (2 years, to age 65, etc.). Don't assume the terms mean the same thing across different insurers - always check the specific policy definitions. This is one of many reasons why professional advice from a qualified insurance adviser is valuable when selecting Income Protection coverage.