Income protection pays a portion of your income (usually 50%) if you are unable to work due to illness, disability, or accident. Income protection will not cover you if your job is terminated. You can choose to take out a separate policy or add redundancy coverage to your income protection.
Income protection plans, like all insurance policies, take into consideration your age, gender and occupation as well as your health. The insurance company views you as a high-risk individual and will determine how much premium you pay.
It is better than nothing.
Income protection is cheaper than PPI but offers better benefits. You have the option to choose when you want the coverage to start – after 4 weeks, 3 months, 6 months or even a full year. This allows you to fit the cover around your existing employment insurance.
If your employer stops paying sick leave, your income protection plan can be set to start after 28 weeks. The premium will be cheaper if the coverage is extended.
Income Protection continues to pay until the end of your term. Many people keep the term until they reach retirement age. Your policy will continue as if you have claimed on the policy but then return to work.
‘Higher risk lives’
Standard income protection may not be affordable for some people. There are policies called “age-related” policies that don’t adjust your premium based on gender, occupation, or whether you smoke. These policies may be better suited for people with higher risk lives.
You can also get income protection policies that pay for a shorter time and have lower premiums.
You should also be aware that income protection policies may affect state benefits. This is why you should always consult your adviser or insurer.
Income protection can be costly if you work in stressful or risky jobs, have health issues or smoke. Most women pay more than men in most cases.
Take a look around
It’s worth getting an income protection quote first, and then applying to the most affordable providers. We recommend that you seek out advice and shop around for the best deals.
Always consult an independent financial advisor (who can search all the market for you). Find one who specializes in income protection products.
Insurance for critical illness
People are often sold critical illness insurance. This is often in addition to PPI. It is important to know that critical illness insurance does not replace PPI or income protection.
If you are diagnosed with a serious illness such as cancer or heart attack, critical illness insurance will pay a lump sum. This insurance can provide additional protection as you can use it for your mortgage and other large debts in the event of an emergency.
It won’t give you a steady income while you are away from work and it won’t cover you for injuries or conditions such as back pain or stress.
Critical illness insurance can provide additional protection to those who have the means, but you should not take it out at all over a policy that provides income for anyone who is disabled or sick.
There are other options to PPI
Mortgage payment protection can be used to pay your mortgage payments. This insurance allows you to choose how much coverage you want each month.