How To Accurately Calculate Income Protection Insurance

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An income protection insurance cover is intended to provide a steady monthly income to members who cannot continue working and earning their regular income due to injury or illness. The cover ensures that you continue meeting your daily needs when unable to work. So you need a calculator to help you know how much premium to pay to adequately cover for a loss of income due to injury or illness. 

Therefore, an income protection insurance calculator is a tool that will help you estimate the amount of money you’ll need to pay for a cover to adequately protect you from loss of income when you fall sick or get injured and you are unable to continue working and earn a regular income. 

The calculator will provide you with estimates that can cover 75% of your monthly income. But it only provides estimates to help you decide on the cover to take. However, it is general advice that will not factor in your objectives. Read on to see how you can accurately calculate income protection insurance.

1. Calculate Your Monthly Expenses

It is the first thing you’ll need to do before you start using the calculator. It is the amount of money you spend on various items every month. It may include items such as rent, utilities, mortgages and property taxes. It also includes other expenses such as loans, debt, credit cards interest, student loan payments etc. Also, ensure that you calculate the amount of money you spend on groceries, food, coffee shop, transportation, insurance, education and entertainment. 

2. Annual Income

You need to enter your annual income in the calculator accurately. It includes salaries, bonuses and commissions. However, ensure to subtract taxes to arrive at the net annual income figure.

3. Long Term Disability Coverage

The calculator will request that you enter the figure for any disability coverage you may be enjoying. If the amount is not available, enter zero in the space.

At this point, your calculator is ready to compute the amount of money you should start paying as premiums from your current income to protect you from loss of income due to disability or sickness. Permanent health insurance guarantees that you receive half or two-thirds of your monthly earnings before tax if you get injured and cannot continue working. You will receive a monthly payment until you resume your daily activities. The income is tax-free.

If you consistently pay the premium, you have a right to claim for the payments when you get incapacitated or disabled. Unfortunately, you may not start receiving payments immediately if you are disabled or fall sick. It may take a minimum of 4 weeks up to about 2 years before the payments start coming your way.  The reason for this is that you will not need the money immediately you get incapacitated. As an employee, you are entitled to 28 weeks of statutory sick leave pay. 

Notice that the calculator is only intended to give you a guideline on the premiums you’ll be required to pay to protect yourself from lack of income due to sickness and illness. Therefore it should not be considered as expert advice.

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