Income Protection Insurance - Essential Facts You Need To Know
Income Protection Insurance
Income Protection Insurance is available for employed individuals, self-employed individuals, contract workers and housepersons. Income Protection Insurance is a long term policy that covers for health related work absence, not redundancy. Income protection insurance is designed to pay out whatever the reason for your being unable to work (subject to one or two exclusions).
Protection
Short Term Income protection insurance is designed to replace your income and reduce the negative effect of your loss of earnings. This tax free sum is paid directly to you to spend as you wish and will allow you to continue to pay your monthly bills and provide the essentials for yourself and your family until you are able to return to work back to top How does Short Term Income Protection Insurance work. Income Protection Policies have variable options that might include: Deferred Payments: When offered this allows you to choose at what point you want the benefit payments to start after you are unable to work. If you are one of the lucky few who have sufficient savings to tide them through a period of unemployment, or you believe you could realistically adapt your lifestyle to take account of your reduced income, then you may consider this short term income protection insurance or any other income protection insurance product to be unnecessary.
Cover
With this income protection policy you can cover just your loan payment or add any or all of your other monthly outgoings. It can provide for any loan or mortgage repayment, household bills such as rent, credit cards, school fees, gas and electricity and removes the need for costly separate cover. Most companies offer a 'career break' or 'non-working' option for income protection insurance, which means that cover can be suspended for an agreed amount of time. Each income protection policy is underwritten individually based on your medical history, therefore if you have a pre-existing condition the insurance company may state that they will not cover you for any related injuries to that condition. If you lose your income a standard loan payment protection insurance policy will only pay your monthly loan related costs leaving you to personally fund your other monthly expenses such as food, credit cards, utility bills or council tax either from savings or debt, a fact that many people forget. Some income protection companies will also not cover wilful self-inflicted
injuries or claims arising from drug or alcohol abuse.
Short
When you have sufficient income from other income sources Short Term Income Protection Insurance is not always required. What are the differences between short term income protection insurance and loan payment protection insurance and mortgage payment protection insurance. Short Term Income Protection Insurance, also known as Income Payment Protection Insurance, provides you with a monthly income if you become unable to work through accident, sickness or unemployment giving you time to find a new job or recover from illness. Short term income protection insurance may be unnecessary if you decide you could survive on your savings.
Benefit
Income protection cover is also not to be confused with life insurance, which pays a lump sum to dependants on your death. As with all insurance, the trick to buying the right type of income protection cover is to consider exactly what it is that you need it to do for you. Medical insurance and other medical covers are provided by organisations, but they cover only the concerned person's medical bills that too only till a certain time. The final difference between Income Protection Insurance and Accident, Sickness and Unemployment Cover is that when applying for Income Protection Insurance, there is a much stricter underwriting procedure to gothrough.
Claim
In the event of claim, income protection policies can continue paying until your selected retirement age. For example a 20 year old male who took income protection insurance out until age 65 could claim on his policy for 45 years if required. If you return to work at a lower rat of pay then with most companies you can claim a proportional benefit to make up for the money you will lose. You can claim as many times as needed and you can also claim more than once for the same injury/illness.
Conclusion
Income protection insurance is basically for those people who cannot resume their normal day to day job, either due to a sudden illness or a disability. Income protection insurance is an invaluable safety net on which you can fall and can make find another job and get back to work. We recommend that contract workers and housepersons check the key features of their chosen policy to ensure they are happy with the cover offered. It should be noted that if you salary changes then you may wish to discuss increasing or decreasing your cover.
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