Do you need income protection insurance?
You may already have a life insurance policy that provides for your family in the event of your death. However, it’s also worth considering a different scenario to understand if you need income protection too.
Imagine if you couldn’t work due to serious illness? Could you and your family make ends meet on just your sick pay and/or savings? If you’re concerned about this, then take advice from your financial adviser. It might be that you should consider income protection insurance.
So, what is income protection insurance?
Put simply, income protection insurance will help you in the event that you are ill or injured and cannot work for a period of time.
What does it do?
- It will replace a portion of your income if you can’t work due to illness or disability.
- It will continue to replace this portion of your income until you are able to work again, or until you retire, reach the end of the policy term, or die – whichever is sooner.
- Be aware, you have to wait a certain length of time before the payments start. For example, payments may start after your sick pay ends.
- It covers most illnesses that leave you unable to work, either in the short or long term, however this will depend on the policy and the definition of being unable to work. You should discuss this with your financial adviser.
- You can make more than one claim on a policy. Basically, the cover is there for you for as long as the policy lasts.
So, do you need it?
Income protection insurance can provide peace of mind whether you have a family or not. So, it’s worth considering carefully. If you’re concerned that you won’t be able to pay your bills if you fall sick – you should discuss income protection insurance with a financial adviser.
If you are self-employed, or your employer doesn’t offer you anything other than statutory sick pay if you are ill, then it’s possible that you’re even more likely to need income protection insurance.
However, there are instances when you might not need it. If you’re comfortable at the thought of getting by on just your sick pay or your partner’s pay, government benefits, your savings, or even the prospect of taking early retirement, then you may not need it.
What affects the cost of income protection insurance?
Obviously, every policy has it nuances, but income protection insurance can cover a wide range of illnesses. Factors that affect the monthly cost of your policy, include:
- Your age
- Whether you are a smoker
- Your medical history and current health
- Your occupation
- How much of your income you’d like to cover
Things to check…
Different providers and different policies offer different types of cover, so it really is important to consider getting advice from a financial adviser.
You should bear in mind that income protection insurance is not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness. And it’s also not the same as short-term income protection, which although also pays out a monthly sum will only do so for a limited period of time (normally between two and five years).
Other types of insurance to consider…
If you’re interested in finding out more about the different types of insurance available to you, click the links below: