This is one of the most critical differences between policies, which will have a very large impact on the cost.

Cheaper policies are generally indemnity policies. Typically, they allow you to claim up to 75% of your income based on the year before you make a claim, up to the limit you agree in the policy. There is no compensation if you are earning less when you claim than when you took out the policy, even if you have been paying to cover the higher amount.

Agreed value polices generally set the benefit amount at up to 75% of your income at the time you take out the policy. It will not matter if you are no longer earning this much by the time you need to claim. This is an important feature for people with fluctuating incomes, for example contactors whose income is lumpy and therefore could be disadvantaged under an indemnity IP policy.

The waiting period is the amount of time between when you make a claim and when you start receiving payments. The longer the period you choose, the cheaper the premiums tend to be, because shorter-term illnesses will effectively be excluded from the policy (so the insurance company will be less likely to have to make a payment). Some policies will let you choose waiting periods of anywhere between 2 weeks and 2 years. Typically waiting periods of 30, 60 or 90 days are offered.

The benefit period is the lifespan of your policy. This will usually be either 2 or 5 years, or continue to age 65. Shorter policies tend to be much less expensive, since the benefit amount will be significantly less. Most IP polices expire once you reach 65, although you can pay to extend them to age 70.