What is life, if not a thread of happy coincidences and unfortunate accidents? Alas, the latter sometimes may affect our lives dramatically, turning them upside down. While preparing yourself for everything is nearly impossible, you indeed can prepare for the unexpected. That’s what insurance policies exist for.
Have you ever wondered what your life will look like if one day you’ll become unable to work? How long will you be able to live on your savings? Are there any additional ways of income to provide for you until you are ready to go back to work or retire?
Seeking answers to these questions may not be the most pleasant and comfortable way to spend your evening. However, there is a way to take care of yourself now to ensure your financial stability in case anything happens later. It is income protection insurance, and here is why you should consider acquiring it.
What Is Income Protection?
According to anorak.life, income protection (also referred to as permanent health protection) is “an insurance policy that pays a monthly amount if you can’t work for any medical reason. It replaces part of your missing income, so you can always cover the essentials.”
The main idea of income protection insurance is to maintain your financial stability when you are unable to work due to medical reasons, both physical and mental, for a more extended period of time than sick pay would – until you may be able to return to work or retire.
Why Do I Need This?
Many people may overlook this option to protect themselves from a difficult financial situation. Some are satisfied with their sick pay, and others have a reliable financial safety cushion. However, these resources can shortly become exhausted in case of a long-term illness or injury. Here are the main reasons why you should consider income protection as your backup plan:
Peace of Mind
First of all, an income protection policy ensures that your income continues even if you are unable to work, making your financial situation relatively less affected. Monthly payments can cover up to 75% of your income, which allows you to continue paying for mortgage, groceries, healthcare, and any other necessary fees during a long-term illness or injury.
Although the amount of money you can make a claim for does not cover your regular income (as it is tax-free), it allows you to be more concentrated on your rehabilitation. And staying focused and optimistic is crucial to facilitate the recovery process.
The income protection policy acquired from an insurer is always adjusted to your individual needs and circumstances. First of all, factors such as your age, medical history, job, hobbies, and lifestyle will affect a monthly premium – costs of taking out the income protection insurance.
Secondly, there are several choices you should make to make your policy work:
- the monthly benefit amount you want to receive
- the deferred period (period of time after which you will start receiving monthly payments) – usually waiting period starts from 1 week up to 52 weeks
- short-term or long-term insurance plan (how many years you want income protection insurance to cover)
You may also want to consider getting independent financial advice to work out the level of cover you need for income protection insurance. Ensure that you do not already have critical illness insurance or income protection insurance from your work. Some employers offer it as a part of a benefits program.
Make it clear how long you will wait for a payout and precisely how much money you will get when you make a claim before signing the documents. Bear in mind that illness insurance policies may have exclusions, and it is vital to clarify them if you have a serious illness in your medical history.
Income protection policies vary from one insurance company to another, and so does the set of support services they cover. When looking for an income protection policy that will meet your needs, you may expect some additional benefits and services, which include:
- a second medical opinion
- a vocational rehabilitation
- complementary therapies for managing symptoms or helping with recovery
- access to independent legal advice on employment rights
- a lump sum to cover initial expenses needed to return to work
- add-ons for extra costs (for example, payment for a hospital stay)
Sharing your family medical history with a financial advisor or an insurer is crucial to determine which additional services you may want to include in your policy and avoid rejection of paying it out later.
Income protection insurance can be an extremely beneficial solution to protect yourself from significant financial losses in case of a serious illness or injury if approached correctly. In order to ensure that your policy will meet your needs, you will have to make some choices for your insurance plan based on your individual health history and life circumstances.
Do not hesitate to look for professional advice or speak directly with your insurers if you have any concerns about an income protection policy you are about to sign.