Income protection is a type of income payment protection insurance which falls under the payment protection insurance (PPI) banner. If you are faced with an income altering event, this policy could be the only thing to save you from financial ruin.
The policy provides a tax free cash sum that can be used to pay your mortgage payments, loan installments or the fund can simply act as a supplementary or replacement income.
The benefits are considered short term because depending on the provider terms, the maximum payment period is 12 or 24 months. If you were to return to health or to work before this period is up, then the benefit payment will cease.
Once you can prove at least six months employment history and you meet the entry requirements of age, residency status etc your policy can be up and running.
You should be aware of any exclusions attached to income protection plans as this could prevent you from owning and making a successful claim.
Once you have cleared up this matter and your policy is in force, you won’t be able to make a claim within the deferment period. Usually a claim can only be made after 30 – 90 days of the named event.
Please note that the benefit paid will not cover your entire salary although the coverage is quite significant. You will need to check with your provider to confirm the maximum amount they will pay out. Some providers will cover 50% of your income or a maximum of £1,500.00 which ever is lesser.
It is worth mentioning that most policies are flexible so you can apply for cover on only one or two qualifying events. In addition, some providers may also offer age related policies that offer lower premiums depending on your age.
Income protection is becoming more and more relevant as the demand for state funds continues to grow. The combination of more claimants and less available resources is enough to prompt employees to consider their own protection.
The good news about obtaining a policy is that there are many opportunities to secure deals on the cost of premiums. By shopping at independent providers for instance you will save on premiums as opposed the high cost provided by high street providers.
Income protection can provide you with peace of mind if you are faced with one of the named events. If your salaried income was to reduce or disappear you will need to meet the shortfall relatively quickly in order to avoid financial disaster. The ease of access and provision of a cash sum is what makes this policy so beneficial.
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