Income protection insurance comes with a wide array of benefits that should not be ignored, especially by some subsets of the population. If you do not have this type of insurance or are not even sure how it works, read on. This article will cover the basics for you.
Who needs income protection insurance?
There are plenty of health factors that can render you unable to work for long periods of time, and many of them are not under your control. Cancer and strokes can happen to anyone, and even marathon runners have heart attacks from time to time. The chance with them is lower, but never zero. Severe chronic depression can also render you totally unable to work for long periods of time. Should you fall prey to any of the conditions above, what happens to your finances? How are you going to live and maintain your standards living with no income?
Depending on where you live, there may be forms of sick pay available to take care of workers in the situation listed above. But in many countries — including the US and the UK — sick pay is meant to provide a short-term foothold, not long-term security.
In the UK, for example, Statutory Sick Pay (SSP) can pay you upwards of £95.85 a week, but only for upwards of 28 weeks — a little over six months. Which sounds like a lot, but that time flies by if you have cancer. Meanwhile, in the US paid sick leave isn’t even mandatory, and the companies who do offer it rarely plan on helping sick employees stay afloat for years. Income protection insurance, on the other hand, is meant to help you do just that.
Income protection insurance policies are designed to provide long-term financial security in case you are rendered unable to work for medical reasons. This type of policy is recommended for anyone who needs a safety net to protect them from going long periods without an income. If you are self-employed, can’t live off sick leave, or can’t receive paid-sick leave entirely, income protection insurance is something you should look into. Especially if you have a family to take care of.
How income protection insurance works
The process is simple. If you are rendered unable to work due to one of the conditions covered by your income insurance, you can claim your benefit. The insurance company will then give you monthly payments to help you stay afloat. Depending on the details of your policy, income insurance might replace as much as 75% of your income.
There is typically a waiting period between you being rendered unable to work and you being able to claim your benefit. Typical waiting periods range from 1 to 52 weeks. Policies with longer waiting periods will, of course, come with smaller premium payments. Which makes longer waiting periods a good deal if you know you can live a certain number of months using just your savings and your sick pay before you need to cash in on your income insurance policy.
When shopping for an insurance policy, you’ll also have to decide how long you want to be covered, and how long you want the benefit to last should you need to claim your benefit. You can learn more about looking for and comparing insurance quotes from this source.
Interesting related article: “What does Layoff mean?“