Becoming Unemployed or becoming seriously ill when you’re renting can be a nightmare as landlords have little sympathy when it comes to paying the rent on time so taking out income protection insurance can be a home-saver.
One of the first things you think about if you have a serious accident and cannot work for a long time, or if you lose your job through redundancy or if you develop a major illness which necessitates and extended period off work is, How do I Pay my Bills? Income Protection Insurance can save the day.
The advantage of such a policy is that if the worst happens you won’t have to worry about having to pay all those bills and it gives you peace of mind.
Generally as long as you pay for income protection from your net salary then all the benefits and income you receive will be tax free so one needs to be careful how such a policy is paid for.
The best way to determine how the policy will affect your particular financial situation is to inquire with the company you are thinking of signing up with or ask your financial advisor for more specific details.
What is Income Protection?
Simply put it’s an insurance policy that pays out in the event that you have an accident or become ill for an extended period and cannot work, thereby losing your income or, if you lose your job completely as a result of redundancy.
What does income protection cover?
As well as covering loss of income as outlined above it can also cover helping you find work and deal with any legal issues depending on which company you take out the policy with and the level of cover you decide to insure.
Normally a policy will pay out 50% to 60% of your normal income.
When you are ill, there is normally a delay before you can make a claim and this delay, often referred to as the “deferred period” can be decided by yourself when you take out the insurance policy. The deferred period is usually either 3, 6 or 12 months and you decide this based upon what savings you have and how long you believe you could survive for in the event of a claim becoming necessary.
Some of the benefits are:-
- Protects your income against sickness or injury with a tax-free monthly benefit.
- Choose your term of cover, up until retirement if desired.
- Insure a percentage of your pre-tax monthly income whether employed or self-employed.
- With many policies, multiple claims can be made if you are unable to work.
- Maintain your current living standards with government support.
- Most business types and trades are covered.
- Generally no medical examination is required.
- Generally covers all age groups from 18 to 65 years.
Do I need Income Protection Insurance – you might ask?
Well, as we highlighted if anything serious happens to you how will you pay your bills? You need to consider whether your employer will continue to pay your salary or a percentage of it if you are off sick? If not and you live alone there’s not many other options but if you live with someone could you survive on their income alone? If not either of these do you have a large amount of savings?
And consider that at any one time over two million people are off work for more than six months at some time. It may happen to you.
How Much Does Protection Cost?
It’s impossible to say here and you need to check with a few online companies to see what they charge as premiums vary hugely with costs based on your gender, occupation, state of your health, including if you smoke or not and finally what level of cover you choose.