It feels like there are 1001 insurance products out there on the market – but do we actually need all of them? One insurance amongst many that you really should seriously consider is income protection insurance.
Income protection insurance is designed for working people to safeguard against financial difficulties if you run into serious illness or injury. If you earn an income and have any financial responsibilities, this insurance product should really be on your radar.
How does income protection insurance work?
Income protection insurance provides a regular replacement income if you become too ill or injured to go to work. This is usually around 50-70% of your normal salary – you decide how much when you take out your cover. The more of your salary you choose to cover, the more your monthly premiums will be.
Once you make a successful claim, you will typically receive your payments monthly, but you can also opt for annually. These will continue until you either go back to work, reach state pension age or pass away during the claim period. Whichever comes sooner, basically.
You will also usually need to choose a deferral period when you take out your cover. This is the length of time that must pass before your policy begins to pay out. You decide on the length of this deferral period when you take your policy out. It could be anything from four months to 12 months. The longer the deferral period, the cheaper the premiums. Just remember – during your deferral period you may not be earning or receiving any money. It’s important to plan for this, perhaps with savings.
Essentially, income protection is designed to allow you to keep meeting rent or mortgage payments, bills and debt repayments and allows you to continue paying your regular living costs even when times are hard and you cannot earn a living as normal.
But do I actually need income protection insurance?
Think about it – are you more likely to pass away before retirement or become seriously ill or injured? Probably the latter. Surely that has to be worth protecting against – especially if you have a family and children to provide for.
One million workers a year find themselves unable to work due to a serious and long-term illness or injury. Who’s to say that you won’t find yourself as part of that one million one day in the future? The average life expectancy is continually on the rise and whilst this is great and gives us more time to spend with our loved ones, it also gives us more time to develop health conditions.
Income protection insurance gives you the luxury to not give up the life you love if the worst happens to you. Of course, you hope you’ll never need to claim on your policy – but that does not mean that those monthly premiums go to waste. You are paying for the peace of mind that you and your family are protected.