If you have ever wondered “What is income protection insurance?”, read on to learn everything you need to know about this type of personal insurance policy.
Protecting Your Family’s Future Financial Security
While most people recognise the need to protect their families’ financial future in the event of their death or a critical illness diagnosis, few consider what would happen if they were to temporarily lose their income due to an accidental injury or a prolonged (though not necessarily critical) illness.
As a result, families are often left struggling financially if the main earner – whose income is relied upon to pay utility bills, pay for a mortgage and/or other outstanding debts (loans, credit cards, etc.) and maintain the family’s standard of living – is injured or becomes ill. This kind of financial struggle can be prevented by taking out an income protection insurance policy.
So, what is Income Protection Insurance?
Available to anyone who is employed/self-employed (part- or full-time), income protection insurance is basically a type of policy designed to protect you/your family against the loss of your income in the event of you becoming unable to work due to an illness or accidental injury.
It does so by making a regular monthly payment representing a percentage of your regular income for the duration of your illness/recovery from injury (or other pre-agreed term) and, by replacing the income lost due to your inability to work, enabling you to cover your monthly expenses while maintaining your usual standard of living.
When taking out this type of protection, policyholders can choose the:
- Duration/term of their policy,
- Cover level (i.e. the monthly benefit amount to be paid out),
- The point at which payment of benefits will commence (i.e. how long after an injury/the onset of an illness payments will start to be made), and
- How long (i.e. for how many months) benefits should be paid/received for.
The cover level and premiums will, of course, depend on the policyholder/insured individual’s specific needs. Many income protection policies also come with varying additional features like, for instance, ‘back to work’ benefits and/or waiver of premium.
Once the correct cover level is in place and the policyholder has started paying premiums, the policy will make the agreed monthly payments to replace lost income if the insured person becomes unable to work due to illness/injury and the policy’s terms/conditions are met.
Income protection insurance is also available to full-time parents and/or stay at home partners, who may not have their own income. Certain providers will set a monthly benefit amount that will become payable, if they are not able to perform their daily duties due to illness or accidental injury.
As income protection insurance comes in a wide range of often highly flexible choice of policies, getting expert advice when selecting a policy is highly recommended.
Spectrum FA’s helpful, friendly advisors have years of experience in navigating this range of policies and, taking your personal circumstances into account, can guide you throughout the entire process and help you select the perfect policy to meet your/your family’s needs.