Protecting your income against unemployment and redundancy is a good idea. If you then become a victim to either of these events you would be eligible to make a claim on your policy and get back a tax free sum of money that you could put towards your outgoings. However the protection can be confusing. The policy that would payout as outlined below is income payment protection and there is another policy, income protection that would provide an income for up to the age of your retirement if possible but would only cover incapacity. Therefore care has to be taken when choosing the insurance to ensure you get the right policy as both can have the same name.
Income protection can be taken with a standalone provider and often this is one of cheapest ways of taking out a policy in comparison to taking out the protection with the lender on the high street. To take out a policy you first have to decide on the amount you want to protect. There will be a limit to this amount so the provider would have to pre-agree to the amount that you choose. This amount is then paid back to you over a period of time which would generally be after the 30th day of you suffering one of the events and up to the 90th day. Some providers will date back the income to the first day of you becoming unemployed or incapacitated but you would need to check with them. Your tax free income could continue for up to 12 months with some providers and with others you could have an income for up to 24 months. However once the term of the policy had been reached your income would cease.
The benefit from your protection could be put to use in the same way your own income was. You could use a portion of it to continue meeting the demands of your rent each month. You might use some of it to maintain your utility bills and to ensure you could put food on the table for the family. A policy would stop you having to struggle and would help to stop you having to make drastic changes.
You could take out your income protection policy to protect against unemployment and incapacity together in which case you could claim were you to suffer from either event. However you could also choose to tailor the events to suit your needs. Some individuals for example are offered a good sick pay plan by their employer and if this is the case a policy could be taken that would just pay out in the event that unemployment occurred. On the other hand you could just choose to protect against incapacity alone if this suited you more. Your chosen provider might also have included carer cover which allows a claim to be made were you to have to give up full time work to nurse a family member back to health. Only a generous provider would give you this so do check with them.
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