Income protection insurance is also known as IP insurance and it covers you when you’re incapable of working due to some illness or injury. Through the IP insurance, there are mainly three things from which you’re protected, accident and sickness, unemployment and the more comprehensive coverage against sickness, accident and unemployment. With the help of such a policy, you’re allowed to safeguard up to 70% of the gross salary and this is designed in such a manner that it will replace your income and offer you tax-free monthly payments which can be used to ease off economic stress when you’re not able to work.
If you’re a beginner, you’ve clicked on the right post as we have compiled a guide which will tell you more about this income protection insurance policy.
Income Protection – Why should you get this coverage?
Anyone who wishes to cover their salary so as to not fall back on their monthly installments even when they’re not able to work, should have this extremely useful product called IP insurance. Few situations when people consider this policy are:
- When they find it tough to make ends meet due to no incoming salary
- When they’re self-employed
- When they have kids and spouse who depend on them
How long is the term of the IP policy?
With most of the companies that offer such policies, you are allowed to compare terms of the policy from 1-75 years but make sure that majority of the providers will just cover you till your retirement age and the maximum acceptable age is 70. Instead of looking towards retirement, there are many who set a certain time period which is linked with the repayment date of some home loan or any other financial obligation.
You won’t be tied to that policy for that time period but as long as you keep meeting the payments towards premiums, you will be eligible to receive payment protection benefits.
How long will be the term of the benefit?
The longer you would wish a policy to have the provision benefit term, the more will be the costs of the premium. The Short term policies for income protection are made to offer you benefits in case you’re not able to work for a certain time period (usually 6-12 months). On the other hand, long-term income protection insurance will offer coverage during a situation when you become extremely ill, so much so that you’re not sure about whether or not you can get back to work.
IP payments deductions
When you fall ill, the IP policy will pay you the benefit amount but only after they deduct:
- Wages or sick pay
- Pension payment which starts from the date of inability
- Income from self-employment
- Other forms of income from dividends and shares
- Insurance payments from some other policy
When your income increases, make you go through income protection insurance reviews so that you could review the percentage of the salary which you’ve insured. Consider all the above mentioned details before buying IP insurance.