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Most people take their health and wellbeing for granted, and do not stop to consider what they would do financially if they fell ill or were injured in an accident that left them unable to work for a period of time. However many people would have major financial problems if this set of circumstances occurred to them.
This is where income protection insurance comes in. It is designed to provide a payout to you if you are injured or become unable to work through illness. It is available in both short and long term options. This means you can decide how much benefit you want to receive from your insurance if you should need to claim on it.
What Is Income Protection Insurance?
In exchange for a monthly premium, you get peace of mind through income protection insurance. If you were unable to work due to an injury or illness, income protection insurance essentially replaces your income.
Specific details will depend on each policy, but in general you can expect to claim your income protection insurance more than once. That means you can benefit from the payouts any time you get sick or injured, and not just the first time you experience a major setback.
With so many types of insurance policies on the market, it’s easy to nickel-and-dime yourself. Is income protection insurance something you should have, or should you put the money you would spend on monthly premiums into a savings account?
Preparing for the unexpected
First, let’s look at all of the options on the table. If you are unable to work, income protection insurance isn’t the only way to weather the storm. Other ways to prepare for serious illness or injury include:
Which method of preparing for the unexpected is best for you?
Should you get Income Protection Insurance?
Income protection insurance is an extremely smart way to hedge against income lost from a severe illness or injury. Even if you have a sizeable savings account at the ready, you can keep those funds intact for your future retirement by using income protection insurance to get you through a rough patch.
As with all types of insurance, the monthly premium ends up costing much less overall than the amount of money paid out by the insurance company. Think about how much money you make each week. The monthly premium for income protection insurance is a mere fraction of that income, and yet the insurance company would be replacing your lost income.
Income protection insurance is especially useful for people who have children or other dependents who rely on their income, or who are self-employed and therefore have no company benefits such as sick pay to fall back on.
Types of Income Protection Insurance
There is no one-size-fits-all insurance policy. There are multiple types of income protection insurance to choose from, including short-term and long-term policies. Short-term policies typically pay out for a limited time, such as six months to a year. Long-term policies pay out for a much longer time.
Other forms of income protection insurance give you payouts equal to certain bills, allowing you to make worry-free payments during your time of ill health.Mortgage payment protection, unemployment protection, loan protection and payment protection are all examples of income protection insurance.
Also note that the difference between income protection insurance and critical illness protection is that payouts occur over a period of time with income protection, whereas critical illness protection gives a one-time lump sum payout.
In short, income protection insurance is a smart way for any working person to avoid some of the disruptions that go hand-in-hand with severe illness, serious injury and lost income. If you wonder whether you can afford income protection insurance, chances are you can’t afford not to have it. Seek a free consultation with your insurance company to see if income protection insurance is right for you.
If you have any questions or need help with your Income Protection Insurance please contact us.