Income protection insurance provides a steady income in the event that you are unable to work due to sickness or disability. It continues until you return or retire. Permanent health insurance is also known to income protection insurance.
You can claim a portion of your income, but it will not replace what you earned before you stopped working. About half to two-thirds (or more) of your earnings from your regular job will be paid to you. This is due to the fact that some money will be deducted for state benefits and the income from the policy are exempted from tax.
If you become disabled or fall ill, income protection payments cannot be claimed immediately. The minimum waiting period is four weeks, but payments may start as soon as two years after your job ends. You may not be able to get the money immediately as you may receive sick pay from your employer, or you may be eligible for statutory sick pay for up 28 weeks after you quit work.
You can also take out critical illness insurance. Before you make a decision about whether to purchase income protection insurance, it is important that you compare it with other types. These policies can be found at Additional help information.
- Before you sign up for income protection insurance, here are some things to consider
- Ask yourself these questions before you decide to take out income protection insurance.
- Are you sure that income protection insurance is necessary?
You don’t have income protection insurance through your job. This benefit is offered by some employers. If this is the case, your employment contract, handbook, or personnel department will provide details.
Whether you have any other type of insurance that is combined with your mortgage, or another policy which covers serious illness.
Whether you have savings that you can use in place of insurance. You need to be careful about whether savings are something you really want. It is possible that you won’t be able save enough money to pay for long periods of illness. You may also face an additional emergency that could drain your savings, leaving you without any coverage for illness.
This is the best type or illness insurance I can get.
To find the right type of insurance for you, check out all available types. If you are concerned about the price of income protection insurance, consider taking out critical illness insurance. This can be a cheaper option. But, critical illness insurance is not able to cover all illnesses and lasts for a much shorter time than income protection.
An independent financial advisor can help you determine which type of insurance is best for you.
Are you able to afford illness insurance?
You may not need it, but the premiums or costs of payment protection insurance are high. If you don’t file a claim, you won’t receive any money back.
Here are some things you should know before you purchase income protection insurance
To ensure that your insurance policy meets your needs, you should carefully read the terms and conditions before signing up. It is important to know exactly what you are eligible to claim, when you can make a claim, and how much you will receive.
The policy documents must be easy to read and plain English. This will allow you to understand what you are signing.
Are there any exceptions?
Insurance policies that cover illness don’t always cover all types of illnesses.
You may not be covered for certain conditions that you or someone in your family have had previously. These are called pre-existing conditions.
Insurance companies will review your family medical history. Some policies will cover medical conditions, while others won’t. Your insurer will inform you if you have any conditions that could affect your ability to take out the policy.
It is also important to understand if your coverage will continue even if you are able to do work other than your own. You may not be able to make a claim if your job is no longer possible. However, some policies allow you to file a claim even if you are unable to perform the same type of work. This should be noted on your insurance policy.
How long do you have to wait for the policy to pay?
Most policies require that you wait at least four weeks after your work ceases before payments can begin. This is known as the waiting period. Some waiting periods can last as long as two years. If you wait longer to file a claim, the premiums (the amount you pay) might be lower.
What you can expect to get if you file a claim
If you file a claim, you will need to be able to calculate how much you will receive. If you have any other income, such as state benefits or other insurance policies payments, it may affect the amount of your payments. It is also important to determine if the annual payments will increase in line with inflation.