Income protection insurance is a very valuable form of protection against a loss of income. However there are two ways of protecting against this and choosing the right type of often confusing as both policies are often simply called income protection. The type we are considering here is income payment protection which pays out under the shorter term. Income protection on the other hand would supply an income that could last up to retirement age but it only covers incapacity, not unemployment.
To take out income protection insurance you need to choose the percentage of your income you want to receive back each month for up to the term of the policy if a claim had to be made. This would generally be set at no more than £1,500 or half of your gross monthly income and so the provider needs to agree to the amount chosen by you. This would then be paid to you each month in tax free income should you need to claim once the deferment period has passed. With some providers the deferment period could be just 30 days of you suffering one of the events covered. With others it could be up to as long as day 90 before you would see any money from the policy. You might be entitled to 12 monthly sums of benefit or your provider could provide you with 24 months of protection, if needed of course.
You could tailor your income payment protection insurance cover to suit your needs. For example if you just wanted to take a policy that would pay out if you became redundant then you could. Or you might choose just to protect against the possibility of losing your income to incapacity if you are unable to work. You could of course take out protection for both events and then claim if you suffered either. There is also the possibility of you being eligible to make a claim if you were to have to give up working to take care of a close family member. Carer cover is included by the generous provider but you would have to check in the terms and conditions to find out.
Income protection insurance would supply you with an income that you would be able to put to use in any way that you wanted. For example you could choose to use a portion of this income to keep up with your rent each month. You would also have the income to be able to maintain electricity and gas bills. You could also afford to keep putting food on the table for your family. Without the luxury of a replacement income you might have to struggle to continue meeting the demands of your essential outgoings. You could have to make changes to your lifestyle which would seriously affect the whole family and which would make life very uncomfortable.
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