Income Insurance Explained

When you are fully employed and your income is regular, the last thing on your mind is the inability to pay your bills. You go about purchasing the things you need and want, you don’t give a second thought to paying bills and perhaps you even saved a bit if there is anything left over. But have you stopped to consider how you will do all these things if your income was to suddenly disappear? How will you pay your mortgage or rent, how will you repay your car loan, how will you keep food on the table? The answer is simple…income insurance.

Income insurance is a protection plan that is designed to replace the majority of your income in the event of involuntary employment. So if you were made redundant, if you fell ill or had an accident, you could be eligible to make a claim for relief.

This type of protection should not be confused with income protection insurance as these policies tend to pay the benefits over a long term period. It is paid until the claimant reaches a specified retirement age, but does not cover unemployment.

The income insurance (also known as income payment protection insurance) in this guide provides a shorter term income replacement benefit and general features are as follows:

• Income is paid for up to 24 months on certain policies, but the average payout time is 12 months
• The income paid under this policy does not cover your entire income, but it is usually enough to sustain you while you seek alternative employment. Be sure to check your provider to ensure the maximum benefit levels are suited to your needs
• One of the best features is the fact that benefits are paid 100% tax free. So even though the benefits do not replace all your income, at least every penny paid is yours
• There are eligibility rules which vary from lender to lender and it is up to you to ask all the questions you need to find out what they are and how they’ll apply to you.

Income Insurance from Burgesses

If you are in fulltime employment and you rely on your income to live and maintain your standard of living then income insurance is a serious consideration for you. This may be the only way to keep you afloat if the unexpected were to happen. Trying to get State benefits may be unrealistic for a number of reasons.

Firstly, the demand for government funding is so great that you may not even qualify to receive benefits and even if you are lucky enough to qualify, would the funds you receive be enough to keep you in the standard you’ve grown accustomed to?

What about family and friends? Think about it, in your current situation, if a friend or relative were to ask you for a loan of £1500 would you have it to spare? If not, do you think your family members or your friends would be able to help you when you need financial help? You’ll have to rely on a bit of luck and chance and hope that someone could come up with the money. Your future is not to be gambled with. Having an income insurance policy will give you peace of mind, that should you lose your job, you’ll be able to continue living as normal until you get back on your feet.

Income Insurance

Of course peace of mind is the first and foremost benefit but other practical benefits are:

• You’ll be able to keep a roof over your head, food on your table and clothes on your back
• You won’t have creditors knocking down your door chasing payments, because thanks to your replacement income, your bills will be up to date.
• Because your bill payments will be up to date, you won’t have to worry about ruining your credit profile with missed payments, defaults or even county court judgements (CCJs)
• The fear of repossession will be foreign to you and if you are the sole earner in your family, you’ll be able to keep your family safe from bankruptcy.

When choosing your product, be sure to find out everything about the eligibility rules and how to make a claim on your income insurance plan. Most providers require you to be a UK resident and in full time employment to begin with, so any other criteria should be discussed. This is to ensure the product you choose is suited to your needs and if you did need to make a claim, your application will be successful.

It is very important to read the terms and conditions of your policy because in 2005, the Citizen’s Advice Bureau brought a complaint on behalf of consumers to the Office of Fair Trading (OFT). The complaint stated that lenders pressured consumers into purchasing their products and that deceptive tactics were often used. Other concerns were over the high premiums and the fact that some lenders incorporated the income insurance into loans automatically.

The Financial Services Authority (FSA) also got involved and as a result some well known providers were fined for mis-selling.

In light of all this, the insurance market is being monitored and providers are more likely to act ethically, so while you can choose an income insurance plan with confidence, you still need to do your part and research the policy.

To increase your chances of securing a good deal, you should visit independent providers and see what they have to offer. For one thing the premiums are usually much lower than high street providers. You might also find it easier to discuss your needs in details and this will help you find the most suitable income insurance policy.

All in all, income insurance is a very important policy to have. Not only does it keep your mind at rest knowing you will be secure if you were to lose your job, but if you do experience unemployment due to sickness, accident or through redundancy, you’ll still be able to maintain your standard of living.