Can you risk not being protected if you are unable to work. Here we explain how Income Protection Insurance works and what to look out for.
How would you meet your financial debts if the worse happens?
What if an illness or injury prevented you from working? The impact of you being too ill to work could have devastating consequences for your family.
Protecting your loved ones by taking out income protection insurance, which pays out if you become unable to work, could prove to be a very wise move.
What help is available?
Many of us believe the Government or our employers will help us when we are unable to work. We know the state benefits we qualify for can offer some limited help, particularly if you have a mortgage. You may even qualify for benefits like housing or carer’s allowance, but it can be a while before it is available and normally will only cover the interest on your loan.
Even if you are employed full-time, your employer will, after a period, cease paying your full salary, leaving you and your family to survive on benefits. This can be from as little as £85 per week.
How can income protection insurance help?
Income Protection is an insurance which is there as a safety net to help cover your outgoings while you are unable to work, income protection starts if you have an accident or fall ill. Payments normally begin as soon as you suffer a loss of income, through illness or an accident.
If claimed in accordance with your policy’s terms and conditions this could be within a few weeks of your accident or, if your contract states that your employer will continue paying your full salary for a set time - the payments could start when your salary payment stops. Which means you can defer payment of benefits to suit your circumstances and reduce the cost of the insurance premiums.
These premiums are also variable depending on how much income you want to receive while you are not working. You can generally choose to receive up to 75% of your salary but you will pay less if you think you can survive on 50% of your salary.
Is critical illness insurance the same?
No, Income Protection is not the same as Critical Illness Insurance. It is important to realise that Critical Illness Insurance does not replace the need for income protection cover because the benefits offered are different.
Critical illness insurance pays out a lump sum if you are diagnosed with an illness that is included on a pre-determined list. Income protection insurance, on the other hand, pays you a regular income if you are unable to work due to an illness or an injury
What is not covered?
Income Protection Insurance will not cover loss of income due to redundancy or being sacked by your employer. Illnesses that you have had in the past are also likely to be excluded, as are certain riskier professions.
You should always read the exemptions on the policy carefully. Also ensure you read the terms and conditions of the policy carefully, and make sure you understand all the definitions.