Income Protection Explained

Income protection is a type of insurance that pays you an income for a period of 12 months and a maximum of 24 or until you go back to work within that period in the event that you become unable to work due to illness, accident or unforeseen redundancy.

Income payment protection insurance is not linked to your mortgage and the main purpose is to ensure that you can maintain your usual standard of living. For you this means that if you were to suffer an unfortunate event such as incapacity caused by a serious accident or if you were made redundant, you will be paid a tax fee income to do with what you like. The product basically will keep food on your table, clothes on your back and a roof over your head.

If you don’t have a monthly mortgage or rent payment to meet each month, then you can use your funds to maintain your monthly bills or use it for whatever you like.

Income Protection from Burgesses

As long as you are employed and rely on your salaried income to live, you need income protection. Things just have a way of going wrong sometimes and the last thing you’ll want is to be out of a job with no income to pay your bills, rent or mortgage.

Because the plan covers involuntary unemployment, if the unfortunate should happen, you may not have had time to set a plan B in place, unless you have an income protection insurance policy, that is.

Each provider will have slight differences between products but the general features of the protection product are as follows:

• You have the option to choose the level of cover you want. Payment is not related to your mortgage so provided you know of any maximum limits, the income you receive could be quite substantial.
• You should know that the higher the benefit amounts the higher your premiums are likely to be.
• Maximum limits – there are limits to how much you can be covered for and this amount will vary from provider to provider. Based on your current income, you will need to ensure you are adequately covered so, if you should make a claim, your standard of living is not adversely affected.
• It doesn’t matter if you are a smoker or not. This is irrelevant to the cost and coverage you receive.
• With most insurance policies, the older you get the higher your premiums tend to be. This is not the case with this product. Generally premiums do not increase just because you grow older, so there is no need to worry about rising premiums at a later time in life.
• The income you are paid is not subject to tax so you can enjoy 100% of your income.
• Because the policy will not pay you the full amount of your salaried income, you need to ensure you can survive on the income you receive.

Income Protection

• The main benefit of the protection is peace of mind. With this insurance in place, you’ll be able to maintain your standard of living should you fall out of work. You can’t always rely on friends, family or even the State for handouts.
• With a regular income you will be able to maintain a clean credit profile as you will have no missed payments or even defaults on your record.
• If you own a mortgage, the fear of repossession will not affect you as you will be able to maintain your mortgage payments while out of work.

Choosing an independent provider will most likely be cheaper than many of the well known high street providers. If you were to take out a loan or mortgage, then the provider will try to get you to take out their protection product, but you don’t have to do this.

Feel free to explore what the independent providers have to offer. More often than not, you’ll find that the coverage you receive is just as adequate as that of the high street provider, but you’ll have the added benefit of much lower premiums. Now who doesn’t like getting more for their money?

When choosing a provider, there are hundreds on the market, so how do you make a final choice? The following tips should help you out.

Look for a provider that is regulated. But that is not all. The Financial Services Authority (FSA) in collaboration with the Office of Fair Trading (OFT) has been investigating the protection insurance market and as a result, in 2005 several well known companies were found guilty of mis-selling their products. So you can see, even regulated companies have fallen guilty.

What you need to do is ensure you get all the information you need to know about the product features and benefits from your potential provider. And most of all make sure you meet all the product’s eligibility rules.

The mis-selling problem did not stem from the income protection products themselves, but rather it was the fact that the providers did not provide adequate information to potential clients.

As the saying goes, knowledge is power, so be armed with your questions for your provider and read all the terms and conditions to ensure that in the event of a claim, you will have no problems being successful.

Income protection is very useful. When you are in a job and life is great, this can be the last thing on your mind, but if you leave it until you are involuntarily unemployed, it could be too late. Now that you have a salaried job and the means to pay for the premiums, go on and see what the independent providers have to offer. You’ll be purchasing invaluable peace of mind knowing that if you lost your income, you’d be able to continue life as normal while between jobs.