Most people already have insurance policies in place for cars or homes and contents, but few people are perhaps aware of how far some cover products can go. For example, there are ways to protect your income, meaning you can get a helping hand in times of an unexpected crisis. For example, you may lose your job through involuntary redundancy or accident and injury or sickness. Few of us would be able to keep up with things like mortgages, rent and other costs if we had no income, so an income protection policy like this can take on added significance during financially uncertain times.
Although it may be not as familiar as car insurance, income protection works in a similar way in that it effectively guarantees a payout in the right circumstances. To qualify, you will need to have lost your job for the above reasons, broadly categorised as ending up without an income through no fault of your own. After a successful claim, the insurance company will pay you a tax free cash sum on a monthly basis, until you are back in work again or the policy expires.
You can often expect to get a set percentage of your income protected, so perhaps 40 or 50 per cent. The idea is not to replace your job, but to help you keep going until you have either got better or found a new job. These helping hands can be crucial when it comes to meeting commitments like mortgages and other debts. Without a means of paying, people can soon find creditors catch up with them and put the pressure on, adding to the stress caused by illness, injury or involuntary redundancy.
In exchange you simply have to pay a regular premium, and policies from some providers cost as little as a few pounds per £100 worth of protection. A first payout will arrive in your account between 30 and 90 days after your successful claim, depending on the policy and provider. Interestingly, some insurance companies will backdate their payments to the first day you lost your income, so it can pay to check the small print of any potential product.
Income protection is also part of the payment protection insurance industry, which has attracted criticism in the past after some firms were found to have sold policies inappropriately. Allegations were mainly centred on high street style firms and against those who sold policies at point of sale, ie to people as they took out a loan with them. To avoid paying over the odds you could try some more independent firms, who may supply just as effective income protection for the same or less.
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