We are well aware that in this era, there are insurance policies provided for just about everything. So is the case with your income. So what is income protection insurance?
You might surely think that nothing is set to happen to you but, data shows that year, close to a million people find themselves at home and unable to work due to an accident or an injury. This is the time when you need the most money yet will not be provided any income. So, for this case, one should surely consider the income protection insurance.
What is income protection insurance?
Available principally in countries like South Africa, Ireland, New Zealand and Australia as well as the United Kingdom, the income protection insurance is also becoming increasingly popular in other countries. It is an insurance policy which pays benefits to policyholders who are unable to work and are incapacitated due to a serious injury or accident. Formerly called the Permanent Health Insurance, the Income protection insurance can be explained in the following points.
- The income protection insurance will replace your income if you become incapacitated to work.
- It will pay out your income unless you can start working again
- You will have to wait a waiting period before the income starts coming your way. However, the later you start getting it, the lesser will the amount of money you get
- It will cover almost all illnesses that are likely to make you unable to work.
- While the policy lasts, you can claim it as many times as you want.
It should be noted that you should study about it properly before deciding to take on the policy. It is not the same as the critical illness insurance, which actually pays a lump sum if you become critically ill.
It is also not to be confused with short-term income protection, which lasts only for a limited period of time and covers the lesser number of illnesses.
Who needs it?
You will need the income protection insurance if:
- If an illness means that you can’t pay the bills.
- If you are self-employed.
- If you are employed and do not have a sick pay to cover your needs.
Consider the facilities provided by your employer and if you think it is insufficient to cover your needs if you fall ill or become injured, you should take on the insurance.
Who does not need it?
You are most likely not going to need the policy if:
- Your partner or family can support you.
- You have the opportunity to take an early retirement and will be getting your pension
- You have enough savings that you can rely upon.
- Your sick pay can cover your needs.
- You can get government benefits to support yourself.
Cost of the policy
The cost of the policy basically depends on:
- Your age
- Your smoking habits
- Your current health status
- Your job
- The income coverage percentage
All in all, take help from an advisor and take on the policy if you think that you will likely need it.
Check also: Top 10 Insurance Companies in India