According to a study, every year millions of people find themselves unable to continue work due to sudden illness or injuries. Under this condition the worker can face a lot of financial crises, your boss might fire you or you have members that depend on your income. That’s when income protection laws arise, to keep you prepared for all the short and long comings that you may face in life. After all, life is very unpredictable.
Depending on your savings, sick pay leaves will not cover up all your financial expenses of hospital and home bills forever. Therefore, Income protection insurance guarantees you to receive a regular income, enough until you retire or can go to work. It is not the same as critical illness insurance that pays out a huge sum during a serious illness.
How it works
Your monthly income from the insurance depends on the policy and situations that you fall under. This all can be discussed under the terms in the policy provided by the person giving you the insurance.
Among the benefits provided by this insurance policy is the ability to claim as many times as a person needs to and this insurance plan usually covers most illnesses that leave people unable to work.
It considers the following
- The job you are in
- Your age group
- Smoking records
- The Percentage you give away from your monthly income
- The range of possible illnesses you might cover
- Depending on your lifestyle the injuries you might fall into
- Your previous health records
- The minimum time you want to claim it
When and how to claim Income Protection Insurance?
Income protection payments cannot be claimed right after you fall sick or become physically compromised. A minimum waiting period of one month should be allowed before payments start, however, the payments can go up to 24 months after you stop working.
How much does income protection cost?
The premium costs of income protection insurance depend on your age, your health, your other habits that could affect your health (for eg. Smoking, excessive drinking, drug use, etc). Apart from these factors, the cost of the insurance will also largely depend on your occupation, particularly the risk factors included in your day to day job. The higher the health risk of your work, the higher the cost of your income protection insurance because you have a higher chance of filing your claim.
Types of Income Protection depending on Term length
Income protection insurance can be long term or short term.
A long term income protection covers you for until the income protection cover ends or until you resume work, pass away or retire, whichever comes first.
A short term income protection covers you from involuntary redundancy at work.
Benefits of Income Protection Insurance
The benefits of Income Protection Insurance are as follows:
- Payment is received monthly : The insurance payment is received monthly and compensates for the lost income.
- Variable or Fixed benefits : While applying for your insurance you have the option to choose the type of cover you want. Apart from that, you have an option to increase your value of monthly premiums to increase the corresponding value of cover.
- Flexible Cover Amount : You have the option to choose the payments receiving dates and the duration in case you are unable to return to work.
It is highly advised that you read all policy-related documents carefully and thoroughly.