Income insurance would act as a safety net if you were to become a victim of redundancy or if you became incapacitated as the result of an accident or sickness. You would be eligible to make a claim on the policy once you had suffered from one of the events for a period of time. This would generally be within the region of 30 to 90 days. Your benefit would then continue providing your income for either 12 or 24 months depending on the provider and then they cease.
The amount of income you would be entitled to each month would be the sum you chose to protect of your monthly income. Of course all providers will set a limit to this amount so you would have to read the small print. Generally providers will allow you to insure up to £1,500 or half of the gross monthly income you bring home whichever was the least amount. If you were then to suffer from one of the events you have chosen to protect against you would have money towards whatever essential outgoings you had to keep up with.
Do bear in mind that 90 days can be a long time to wait before seeing any replacement income and debts could have built up by this time. Also take into account that a policy paying out over 24 months would cost more than one paying over 12 months.
You could choose to take out income insurance to provide a replacement income for redundancy and incapacity in one policy.
You would then have the security of being able to make a claim if you suffer from either of these events. Alternatively if it suited your needs better you could just take out cover for unemployment alone or incapacity alone. Also check the small print to see if your chosen provider gives carer cover in their policy. A generous provider will include this which means that if a close family member should suffer incapacity you would be able to take care of them and the policy would provide your chosen income.
If you do not have protection to fall back onto then along with recovering or searching for work you would have the worry of where to find money each month for your outgoings. You could have to rely on being eligible to claim an income from the State.
State benefits can be a letdown as they often do not produce the income that you used to bring home. This again could leave you struggling with the little money you were entitled to and have to juggle it around. If you have life savings then you might consider using these if you should lose your income. However it could take many months before you had found work or had recovered from your illness or accident and your savings could have run dry before this time. With income insurance tucked away you would know how much money you would see from the cover, when you could make a claim and for how long you would be able to rely on benefit.
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