Fortunately, there are things you can do to protect yourself against losing your income. Income insurance policies help you in the event of job loss.
Read on for an overview of what income protection insurance is and why you should consider getting a policy.
What is income protection insurance?
There are many types of disability insurance on the market. Income protection insurance is a specialized product that will pay tax-free income if you are injured or ill and can no longer work. The goal is to bridge the gap until you are able to return to work.
Stress-related injuries, as well as serious illnesses like cancer, would qualify you for payments. Payments are generally made monthly and will continue until you die, retire or return to work.
Some policies also offer “staggered” benefits when you have coverage provided by your employer. Tiered coverage will provide a smaller payment while your employer payments come in and increase once they stop.
Other policies will have their payouts linked to inflation. Their payments will increase by a small percentage each year to keep up with rising prices. However, their bounties will also increase over time.
Why Consider Income Protection Insurance?
Income protection insurance is ideal for the self-employed, as you likely won't have access to employer benefits. Also, anyone who has little savings, many recurring bills, or dependents should consider this type of policy.
Individual income protection policy insurance will pay more than the government does for disability. It can help you maintain your standard of living.
What to remember about income protection insurance
There are two main things to remember when looking at the different income protection insurance policies. The first is that these policies will rarely cover your past earnings.
The second thing to remember is that payments for these types of policies will not be applied as soon as you stop working. Most policies will have a set period that they won't pay you, usually ranging from a few weeks to a year.
Keep in mind that choosing a longer deferral period can help keep your monthly premiums low for this type of insurance policy.
Protect your financial health.
Having an income protection insurance policy can help protect you against financial shocks. Changes in your job are not always within your control. These types of policies can ensure that your lifestyle and dependents are not at risk if you can no longer work.
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