What's the difference between Agreed Value and Indemnity Income Protection policies?

Agreed Value and Indemnity are the two main types of Income Protection policies, and they differ significantly in how your benefit amount is determined. With an Agreed Value policy, you and the insurer agree on your monthly benefit amount when you take out the policy, based on your income at that time. This amount is locked in and guaranteed, regardless of your income at the time of claim (though you still need to be working and earning income when the policy is taken out). Agreed Value provides certainty and protects you if your income drops before you claim. However, these policies are more expensive and becoming harder to find, with many insurers no longer offering them. Indemnity policies, which are now more common, calculate your benefit based on your actual income at the time of the claim, typically averaging your income over the previous 12 months. This means if your income has decreased since taking out the policy, your benefit will be lower than originally calculated. The advantage is lower premiums, but there's less certainty about your benefit amount. Your choice depends on your income stability, budget, and risk tolerance.