Income Protection Insurance – Should the Rainy Days Come

| August 27, 2013 | 0 Comments

Protection insurance

Sometimes people find themselves falling ill or sustaining some sort of injury that prevent them from going to work for a particular period of time. Income protection insurance has been introduced to cater for such incidences at the time of need. So, what is income protection cover all about? It is a type of insurance policy designed to pay out a regular tax-free monthly income if the policy holder is unable to go to work for some reasons related to health or injury. The general coverage is about 75% of the policy holder’s total monthly income. Different benefit packages can be available, depending on how long the insurance will pay off in certain incidents. Unfortunately, in these cases, even the most careful and financially conscious ones can have problems financing even the essentials. In order to help you get a clear picture of the whole process, it is important to understand how this type of policy works.

How does income protection insurance work?

When choosing an income protection policy, there are some driving factors you actually need to take into account. It is however easy to understand how the protection plan works once it is correctly set up. Employees in the vast majority of job occupations have a chance to approach an insurance company that offers income protection policy and check whether they are qualified for such policy. Verification process is quite simple and fast. Once the policy is set up, you have the right to claim your insurance coverage. This means you will still be receiving a good percentage of your monthly income, should you be unable to work due to an illness or injury. For instance, a mechanic may accidentally injure his hand in a way that he is unable to attend his daily chores. In such a situation, he would be eligible to claim his income protection cover, if he is a policy holder. Insurance companies try to arrange such covers whenever appropriate.


Do you still need income protection insurance if you have worker’s compensation?

It is common and actually very important to have worker’s compensation if you are an employee. Workers’ compensation is designed to cover employees against workplace related incidences and possible injuries. However, this alone may not give you full protection that you need. You have to consider an income protection plan that will provide an extensive level of coverage if you become incapacitated due to illnesses or injuries that are not related to your work. If you are an employee, you probably understand how complicated worker’s compensation claim process can be. Moreover, there is a limit to the maximum period of time you can receive payments. Income protection insurance will on the other hand give you a chance to choose how long you wish to receive your benefits. You can possibly get up to 75% of your salary until the agreed period.

Do self-employed need income protection insurance?

Income protection cover is not limited to employees alone; the policy is available to self-employed personnel as well. In fact, sole traders and self employed are recommended to take out this policy as worker’s compensation is not available to them. Income protection insurance is there to ensure traders and self employed are protected against financial crisis in cases of illnesses and injuries.

Terms of the policy

Benefit payments highly depend on your accessible income and of course the level of the policy. The first step is to choose the type of policy that suits you. There are actually two types of policies, which are agreed value and indemnity. If you go for agreed value policy, your benefits will be determined by your original income when you first signed up for the policy. If you take out indemnity policy, total benefits will be determined by your existing taxable monthly income at the period of your injury or illness.

When it comes to the length of your benefits, you will be the one to decide, up front. Therefore, you can choose 2 months, 5 months or even 6 months while some policies can as well insure you indefinitely. This means you can be insured until retirement.

The downsides

Those who are working on high risk jobs are most of the time required to take long-term income protection. This is because they are prone to accidents that can prevent them from going to work for longer periods. Other factors that may influence insurance costs include health condition, gender, level of cover, occupation risks and waiting period. Depending on the insurance company you choose, some policies may have strange exclusions. Such policies will not allow you to attend to any other job apart from your own job in order to receive payment.


Many people hate to think that their healthy lives can turn them down at some point. While it is good to hope for the best, it is even much better to prepare for the worst. Protecting your income can help you survive financially through the months of recuperation.


Category: Press

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