5 things you should know about income protection
Income protection is something many of us don't fully understand; however, in today's uncertain landscape, it’s something we’d all benefit from being familiar with.
Here are the five things you should know about income protection insurance so you can decide if it’s right for you or not.
Firstly, what is it?
Income protection is a form of financial security, ensuring you have access to an income if you fall ill or are unable to work due to an accident.
Typically, it has the potential to replace a large part of your salary, which means it can cover costs such as rent or mortgage repayments, making it an invaluable tool in a difficult situation.
Furthermore, it isn’t just for those on salaries; self-employed, contractors and business owners can also benefit from it.
If you are considering income protection insurance, here are five things you should know:
- It's not the same as critical illness insurance
Many people confuse income protection insurance with critical illness insurance, but they’re two different types of policies. Critical illness insurance will pay you a lump sum if you are diagnosed with a specific illness, such as cancer or a heart attack, whereas income protection insurance will pay you a regular income if you’re unable to work due to an illness or injury.
- It's important to choose the right waiting period
The waiting period is the amount of time you must wait before your income protection insurance policy starts paying out. Waiting periods typically range from 14 days to one year, with longer waiting periods leading to lower premiums. When choosing your waiting period, consider how long you could manage without an income, as well as any sick pay or other benefits you may be entitled to from your employer.
- It's not just for manual workers
Income protection insurance is often associated with manual workers who have a higher risk of injury, but it’s also suitable for office workers and those in less physical jobs. In fact, anyone who relies on their income to pay their bills and support their family could benefit from income protection insurance.
- There are different types of policies available
There are two main types of income protection policies: long-term and short-term. Long-term policies will pay you a regular income until you are able to return to work, retire, or until the end of the policy term.
Short-term policies, on the other hand, will only pay out for a limited period, typically between one and two years. Short-term policies are usually cheaper than long-term policies, but may not provide you with sufficient cover if you are unable to work for an extended period.
- It's important to read the terms and conditions
As with any insurance policy, it's important to read the terms and conditions of your income protection insurance policy carefully. Make sure you understand the waiting period, the percentage of your income that will be paid out, and any exclusions or limitations that may apply. For example, some policies may not cover pre-existing medical conditions or may not pay out if you are unable to work due to a self-inflicted injury.
In conclusion, income protection insurance is an invaluable protection to have if you want to make sure your income is never put at risk.
Knowing that your bills can be paid and your family can be supported if you find yourself out of work through illness or injury can provide valuable peace of mind. It ensures there’s financial security for you and your loved ones no matter what life throws your way. In addition, if anything did happen, it would give you the financial freedom to take the time you need to recover and to focus on getting back to full health without the stress of worrying about financial burdens.
Income protection can be tailored to your needs as there’s a wide variety of cover on the market. You can choose a plan that best suits your individual lifestyle and budget. You can also tailor it to work alongside any sick pay you might be entitled to form your employer.
Doing research, understanding the coverage, and finding out what fits your situation and budget best will help you find the right policy for you.
Alternatively we can help you navigate the options and help guide you on what’s right for you and your budget. Get in touch to find out more.
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You can book an online meeting with one of our advisers at your convenience here.
