Income Protection Insurance Explained

Have you heard the saying that most people in the UK are two to three pay cheques away from bankruptcy? Sounds a bit drastic doesn’t it? But if you think about it there could be some truth to that statement. If you were to lose your job and had no other income, how long will it be before you could no longer keep up your car, house and loan payments? Once you begin missing these payments, things could go badly really quickly, but don’t worry, a small investment in an income protection insurance policy will ensure you avoid this scary possibility.

Income protection insurance is a policy which is designed to pay you a replacement income if you lost your job due to an involuntary incident such as redundancy, accident or sickness. While you won’t want to have any of these things happen to you, it is much better to be prepared for the uncertainties life could through at you.

Income Protection Insurance from Burgesses

The features of income protection insurance vary from lender to lender but generally, this is what you can expect from a policy:

• Benefits are paid for between 12 and 24 months as these policies cater for short term need
• Typically, you will not receive 100% of your income from the policy, there are maximum benefit levels, so check with your provider for more details
• Before you can make a claim, the provider will require you to be out of work for a continuous period between 30 and 90 days
• Some policies can’t be claimed on until the policy holder has had the product for a minimum of six months. This may seem like a long time, and because life is so uncertain, you should try to secure a policy with a shorter qualifying time
• Normally, the higher the level of cover, the higher the premium

Having numerous bills and credit cards seems to be quite normal in today’s world but many people don’t stop to consider insuring their income and when the unexpected happens, they stand to lose everything. You don’t have to be one of them, you could avoid that situation.

Just imagine if you were to fall ill and lost your job as a result. Imagine if while on your sickbed, creditors kept calling or knocking at your door. The stress and anxiety of it all could make it impossible for you to focus on returning to good health. You can avoid all of this by simply insuring your income.

Income Protection Insurance

The main benefit offered by income protection insurance is peace of mind. While you are in full time employment, you don’t have to worry about your standard of living falling if you were to lose your job. And if you did lose your job, you don’t have to worry about losing your home or falling behind in payments, because your insurance policy will pay you an income to take care of all your monthly expenses. Now what could be better than that?

Other benefits include:

• You will be able to keep your credit profile at the same level in that there won’t be any missed payments which could lead to defaults and even county court judgements (CCJs)
• You will be able to maintain your normal standard of living
• The benefits are paid 100% tax free, so all the money is yours to do with what you like
• You won’t have to worry about repossession of your home or car because you won’t even have the chance to fall behind in your payments
• You won’t be reduced to depending on the state for handouts (provided you qualify for benefits) and you won’t have to ask friends and family members for cash. These two options have no guarantees but an income protection insurance policy does

Basically, income protection insurance will ensure you continue to have food to eat, clothes to wear and a roof over your head.

There are hundreds of providers on the market; some are good some are not so good so you need to take your time when choosing.

There have also been cases of mis-selling in the past and understandably this may not instil confidence in the market. You should know however that the Financial Services Authority(FSA) along with the Office of Fair Trading (OFT) investigated the market in recent years and this resulted in many well known providers being fined for mis-selling. The FSA continues to monitor the market, so providers are more likely to operate above board.

The mis-selling problems occurred because providers were not taking the time to find out the needs and circumstances of their potential customers and as a result a lot of people were sold products they could not claim on.

To avoid being a victim of mis-selling you need to make sure you have all the information you need. Normally this is where independent providers stand out. Not only do they provide policies with much cheaper premiums, they also take the time to review your circumstances in order to ensure your product is right for you.

In addition to choosing an independent provider, be sure to read your terms and conditions carefully. Ask about any exclusions for example. The main thing is to make sure if you make a claim on your income protection insurance cover, it will be successful.

If you were to lose your job due to redundancy, sickness or accident, it does not have to be a life altering event. Once your income is protected with income protection insurance, you can make a seamless transition between jobs and best of all, you’ll continue to live life because your financial situation will not change thanks to the replacement income. So with such great benefits to look forward to, there is no reason to delay. Go on and consider purchasing your income protection insurance now.