Income Protection Insurance is a long-term insurance policy which makes sure that the policyholder will get a regular income in case of a person is not able to work or will be able to return to work.
Having accidents in life is unavoidable. If you lost your source of income due to illness or accident, then having Income Protection Insurance (which is a long-term insurance policy) will help you in getting a regular income until the time of your retirement or being able to return to work.
How does Income Protection Insurance work:
It will make sure that:
- It will provide you with a fixed, regular income to replace the part of your income which was discontinued due to an illness or accident.
- It will pay you until you are able to work again or until you retire or you die or reach the end of the policy term, whichever comes first. ‘
- It will pay you approx 50-65% of your salary if you are not working.
- It covers almost all the illnesses which can lead you unable to work for a short or long period of time. Also, this coverage depends upon the type of policy you have taken.
- The good thing about Income Protection Insurance is that it can be claimed over and over in case of need until the policy ends.
Income Protection Insurance is different from critical illness insurance. Critical illness insurance provides you with a one-time large sum in case of serious illness, while Income Protection Insurance does not.
In Income Protection Insurance, there is a deferred or pre-agreed waiting period before the start of the payments. You can select a 4, 13, 26 weeks or a year waiting period. With longer waiting times, the monthly premiums are also low.
Why you require Income Protection Insurance:
In case an individual is unable to work due to an illness, he or she may think that their employer will continue to give them some salary, but in reality, you will move to statutory sick pay automatically after six months.
Only a few employers will continue to support their employees in case of illness for more than a year. You should check with your employer what benefits will be given to you in case you fall sick.
So in such cases depending upon your savings for your bills will soon leave you penniless and unable to pay for the essential bills. The income loss will make you unable to pay for rent and utilities.
This is more concerning in case you are self-employed and have no sick pay. So it will definitely help you in getting through the critical condition.
Who doesn’t need Income Protection Insurance:
It is not required by:
- An individual who can get sick pay. Some people have employee benefits packages which will provide them with an income of 12 months or more.
- Individuals who can survive on government benefits, which are enough to cover their expenses.
- If you have enough savings or money, which can last for a longer period of time.
- Suppose your family has a good financial condition which can support you. The earning member in your family must earn enough to cover you and the other needs of the family members.
The Income Protection Insurance cost:
The Income Protection Insurance cost depends upon the policy you have selected. Different policies have different premiums depending upon the benefits they are offering.
The Income Protection Insurance cost is mainly affected by the age of the person, including other factors such as occupation, smoking habits, income percentage you want to cover, deferred period, types of illness and injuries and also the current health of the person.
Apart from these, the premium amount also depends upon the type of premia, such as standard, which will increase with time or guaranteed premium, which will remain fixed throughout the policy.
These guaranteed premiums are more costly than the standard in the short term, but they are more reliable and will provide more in future.
Important things to take care of:
- While buying Income Protection Insurance, one must be honest about their medical history. All information which is required by the insurer should be provided honestly. In case you don’t provide the required information, you will not get the payout which you need.
- Always select an Insurance which can cover all your requirements. You should select the cover according to the condition of your own occupation, suited occupation or any other occupation.
- Read the policy completely before signing. You should know what your policy will cover and what not. The exclusions differ according to policyholders. So read all the documents clearly and understand your Income Protection Insurance completely.
- If you change your mind, then you can get a refund within 30 days.
- Read your policy regularly and make sure that it covers your requirements. If you have some requirements which are not covered in the policy, then you can increase them.
- Income Protection Insurance will help you in getting a stable income.
- You can be worry-free about the bills in case you get ill or are unable to work.
- It will cover about 50-65% of your salary.
- You can select your policy according to the requirements.
- In case your requirements change over time, you can make changes in policy too.
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