Income Protection Insurance: What Does it Mean?

A guest article from Sachin

Income protection insurance is fast catching on as a smart way for people to protect their assets should they have an accident or fall ill.

Income protection insurance is a new idea for a lot of people, though it is fast catching on as a smart way to protect your assets should you have an accident or fall ill. The basic premise of protecting one’s income is to ensure that the majority of your salary will still be coming in, even if you are unable to work. The following is a basic breakdown of what it means to have income protection insurance.

What is it?

Basically, income protection insurance is there to meet the needs of wage earners who are unable to work because of accident or illness. Often benefits provided by the government fall well below the need of average earners, so additional insurance can help make up the difference. When needed, the insurance will provide the policyholder with a fixed monthly payment that is usually around 75% of their regular income, helping to continue paying necessary bills even when they aren’t able to work.
Who Needs Coverage?These days, one of the greatest risks most of us face is the inability to go to work. Essentially, our ability to earn an income is one of our biggest assets and, should this ability be taken away, we stand to lose everything that we have accumulated such as cars, homes and other assets and investments. It is recommended that all working people at least consider getting income protection, though it is especially important for those with large financial obligations such as a home and dependants.

How Much Does it Cost?

The cost of income protection insurance varies per person, but is generally about 2% of an individual’s total income. Like with most insurance premiums, it can deviate from the norm based on other risk factors such as age, gender, whether someone smokes or not, pre-existing health conditions, lifestyle and occupation, so you should call for a more exact quote.

How to Shop for Coverage

For anyone planning on shopping for income protection insurance, it is highly recommended that you enlist the help of a qualified advisor. Although there are many companies out there who provide blanket insurance coverage, people who have a more complex financial situation will benefit from having a customised plan. The best thing to do is start by researching your options and getting some income protection quotes online, so that you know exactly what to expect.

Benefits of Coverage

Besides the obvious benefit of not going broke if you are to get sick, insurance protection offers some other benefits as well:- Coverage is continuously given from the time the policyholder becomes incapacitated until the first of the following occurs: recovery of health, retirement, the end of the term of contract or death.- Coverage is paid regularly and is tax-free.- The insurance company cannot cancel or refuse to renew the policy as long as the policyholder is paying their premiums on time.- Depending on the policy, the policyholder may be eligible to have their premiums waived during the time they are receiving coverage from the policy, with the policy coverage continuing as normal.