Income Protection

An income protection insurance policy is designed so that it will provide you with an income to make up for lost income should you be incapacitated whilst you are covered by a plan. The actual insurance itself will cover you with a monthly income over a long period of time upon diagnosis of you being incapacitated. An example of you being incapacitated is if you are unable to work due to sickness or accident. With many of these plans you can also look at adding additional benefits to the plan. You can look at adding waiver of premium to your plan, this would mean that should you need to make a claim on the plan the premiums would be paid on the plan by the provider.  The idea behind income protection is that it will cover income lost that we are reliant on for our day to day living. These could be things such as utility bills, loans, rent and your mortgage payment. The insurance would help make things a little easier and cover these expenses.   These can be a cheaper alternative to taking a full income protection plan.  The repayments made on the policy can be monthly or yearly in order for you to keep the plan going.  With the majority of the income protection plans that are available on the market there are no investment values attached to the plan.  Also, you are not tied into a contract with the policy.  This means that your only commitment to keeping the plan going is by paying the direct debit every month or year.

INCOME PROTECTION COVER

You will often find that with the majority of income protection plans they will have a deferment period built into them.  This is the period when you are initially off from work during which the plan will not pay you.  During this time you are expected to make your own arrangements to survive on.  However, there is the option to get the payment backdated to day one once your deferment period has finished. There are different deferment periods to choose from, these are normally 4,13,26 and 52 weeks. What you will often find is that the longer the deferment period, i.e. the longer you initially go without payment on the plan, the cheaper it will be.  Ideally you should take into consideration your current occupational benefits, unless you are self employed, when considering how much benefit you require and when you wish this benefit to be paid.  

INCOME PROTECTION INSURANCE

You will also need to consider how long you are willing to live off any savings you may have.  This is the best way of deciding how long you should take your deferment period over.  Often with your income protection plan you will find that it will continue to pay the benefit until one of the following events occurs; you may die, if the term you decided to take the plan over finishes, you stop suffering enough of a loss in your income to end the benefit being made, or you are no longer incapacitated.  When you are deciding on how long you should actually take the plan over you will need to take into consideration the date you intend to retire.  You should then have this as your policy end date.  When the company providing you with the income protection assesses your application they will ask you to complete an application form on this they will ask you a number of questions regarding your personal situation. This will look further into your medical history, personal circumstances and finances.  Once they have looked at this information initially they may decide they want further information about your medical situation.  

ACCIDENT SICKNESS & UNEMPLOYMENT (ASU)

The company may decide to write and get a GP report, or they may also decide to write and ask you to have a medical examination.  If the insurance provider does decide to ask for a report or for you to attend a medical examination they will pay for this. The actual premiums you will have to pay on a monthly basis can be either reviewable or guaranteed. A reviewable premium means that the insurance company offering the income protection can review your premiums and decide if they are going to increase, decrease or keep them the same. This process normally happens every 5 years. If you were to take a guaranteed premium, this means the premium will remain the same throughout the full policy term. A reviewable premium is often cheaper than a guaranteed one.

When you are making a claim on your plan you will in most cases need to fulfil a number of different criteria. You will need have medical confirmation regarding the condition you are suffering with, and that you are unable to work due to the condition or injury and this then results in you having a loss of earnings. If it looks like you are going to have to make a claim on the plan then you need to let the insurance company know as soon as possible. The majority of the income protection insurance providers will assess your claim on the insurance by determining that you are not able to carry out the main and substantial duties of your occupation. When you are defining what it means by substantial and main duties of your occupation this means the imperative duties you have to do as part of your occupation that take a significant part of a persons time that your employer needs completing.

The claim is then looked at by the insurance company and if it is deemed you are not in a position to do your job you should get the insurance paid. If you are in a position to return to work after having had a claim then the benefit you receive will stop. However on the majority of the income protection contracts that are available there may not be a  limit to the amount of claims you can make. The only stipulation is that you start making the payments on the plan again once you have returned to work. One of the other options you can add to your income protection is to index link the benefits. This means that the amount you will receive in the event of a claim from the income protection policy will increase over the term you have the plan for. This increase option is put into the plan to allow for inflation. Inflation can be the cost of living rising over a period of time. If the benefit you receive from the plan dont increase over a period of time it will potentially leave you with insufficient cover as time progresses.

When the insurance company assesses your application for income protection it will look at your job and classify your occupation into a number of different groupings relative to cost and also define the criteria for eligibility for a claim. These definitions will then reflect the type of cover you will eventually receive. You could get an own occupation definition, this will mean that your policy will be defined on you being able to do your own job. You possibly could get a suited definition, this means you are unable to do your own job or something similar and the final definition is any occupation. Any occupation means that you are unable to do any kind of paid work. The best of the definitions you can have is the own occupation definition as you should get your payment from the insurance if you can’t do your own job. Whereas with the other two definitions the insurance company would want to see if you can do other jobs before offering you payment on the plan. With income protection plans you may find there are exclusions placed on the policy. There are a number of common ones you will find that most insurance providers might put in place. These are things such as self inflicted injuries, any sort of criminal offence, alcohol abuse, drug abuse and if you do not follow medical guidance. You will also find that with most income protection plans they will not offer you cover if you have some pre existing conditions.

Individual income protection - Long Term income protection

When you file a claim, you can expect to receive benefits regularly, with your Income Payment Protection Insurance Policy. Usually, you will receive the funds every week or month. Keep in mind that the income you receive is free of tax. Furthermore, if you want to keep your Income Payment Protection Insurance Policy, all you have to do is pay the premiums. The insurance provider will never cancel your policy, if you are paying the premiums. Keep in mind that you will only receive benefits if you become unemployed due to illness or an accident. Most insurance companies do have restrictions. If you should become unemployed due to alcohol or drug abuse, criminal acts, pregnancy or intentional self-harm you would not be covered with your Mortgage Income Protection Cover.

Many people are at risk because they do not have a Mortgage Income Protection Cover Policy. If you are not in good condition and you cannot work, you still need to support your family and household. You still have debts that need to be paid, car payments, taxes, your rent or mortgage.  The insurance offers you an income stream if you cannot work, so an Income Protection Policy will give you peace of mind.

Mortgage income protection - unemployment income protection

Unemployment Income Protection offers you the income that you need, while you are out of work. Unemployment Income Protection is essential for people that pay a mortgage. If you get sick due to an illness and you are unable to work, the extra coverage is very nice to have. You would not have to worry about losing your home and you would be entitled to a large portion of your gross salary. You would be able to stay home while you heal and recover from your illness or accident. If you purchase Long Term Income Protection, make sure you review the details and the disclaimers completely. Get all the facts about your policy before you sign up for coverage. Keep in mind that if you are already sick and unemployed, you will not benefit from Unemployment Income Protection Insurance.

You need to purchase the coverage in advance to be eligible for payments at a later time. Many times the insurance company will only start paying you benefits, after you have been unemployed for a certain amount of time. Policies do vary among insurance providers, so take the time to compare policies and plans before you purchase Unemployment Income Protection Cover. This kind of policy would cover a certain period of time, so make sure you find out how long you would be receiving benefits from the insurance company. Unemployment Income Protection is completely free of tax so you would not have to worry about it when you file your taxes. The coverage will provide you with the income that you need to get by, give you time to recover, and help you get back on your feet again. Also, keep in mind that the sickness insurance is affordable and if you do not have a mortgage, you would still benefit from unemployment income protection insurance. You would also receive benefits, so you could pay your bills, rent, car payments and other expenses.