There are many benefits attached to an income protection policy. You will benefit if you are out of work due to an accident, illness or perhaps if you were made redundant. These three incidents are covered by the policy and they are classed as involuntary unemployment.
Before we delve deeper into the policy details, it is important to note that the protection insurance in this article is not the same as the policy that pays out for years but does not cover unemployment.
In this article we will concentrate on the shorter term policy which pays you a monthly income for 12 or 24 months depending on the provider you choose.
If you were to return to work within the maximum period then the tax free payment will cease.
While the financial benefit is a reward in itself, the other major benefit of income protection insurance is the peace of mind it provides. If you lost your job, there are so many things that can be affected. You can have missed mortgage payments which could lead to a poor credit profile, this in turn could make it difficult for you to access low interest credit in the future. The list could go on.
With protection in place however, you won’t need to worry about any of this, if all or part of your monthly income was affected you will receive a replacement or supplementary income.
Features Of The Policy
Providers of income protection insurance normally have maximum benefit levels so you won’t ever receive the equivalent of your salaried income as a benefit. The payment will be a percentage of your gross wages.
If you are thinking about applying for a policy, be prepared to prove at least six months employment history. In addition to this you will need to meet the entry requirements.
One other thing to note is the exclusions attached to these income protection insurance policies. Many providers do not take the time to explain what these are and very often it is the unsuspecting consumer who pays the price. To avoid purchasing a policy you will not be able to claim on, read your terms and conditions carefully and make sure your circumstances are covered in the insurance.
Once you do need to make a claim you will need to wait out the 30 – 90 day deferment period.
How To Choose Your Policy
Because most providers have very similar benefits, one way to differentiate between providers is by the cost of their premiums. If you were to obtain a quote from an independent company for example, their premiums will be much lower than a high street provider’s.
Conclusion
If you are concerned about how the uncertainty of your future or economy could affect your income then you might want to consider income protection insurance. Even if you never have the need to make a claim, the peace of mind you receive just by having protection will be worth every penny.
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