Insurance Checker

Income Protection Can Be Invaluable, But The Sector Is Still Confusing

income protection is taken out to ensure that if you were to come out of work due to suffering an accident, through sickness or if you were to become unemployed by such as redundancy then you would still have an income with which to pay your essential outgoings.

Providing income protection is suitable for your circumstances it would begin to provide you with a tax free income to replace up to a certain amount of your lost income each month once you had been out of work for a certain length of time, which can be anything between 31 and 90 days of being out of work. Once the cover had started to payout then it would continue for between 12 and 24 months depending on the provider and it would make sure that you could pay your essential outgoings and so not make a huge difference to your lifestyle.

However just as will all the family of payment protection there are reasons which could stop you from claiming on a policy which means income protection might not be suitable for your circumstances. While exclusions can differ slightly between policies there are some that are common to all policies and these include being of retirement age, if you are self-employed, only in part time work or if you suffer from an ongoing illness at the time of taking out the policy. It is essential that you check the small print of a policy because this is where the exclusions can be found and they can make the difference between you being able to claim and being stuck with a policy thats useless.

The exclusions are just one of the many reasons why income protection and the rest of the family of protection policies are confusing and it is hoped that soon policies will be easier to understand. In 2005 the Office of Fair Trading received a super complaint from the Citizens Advice which led to an investigation by the Financial Services Authority and the subsequent handing out fines for mis-selling of payment protection products. The main reason for the mis-selling was a lack of information being given to the consumer and from the investigation it was stated that firms were to make huge improvements to their selling techniques. While changes have been made the latest news is that there is still very little progress been made in three out of the five key areas that needed to be improved, which means that payment protection of which income protection is one, is still confusing.

This might change in March 2008 with the introduction of comparison tables by the Financial Services Authority. The tables will ask a series of questions so that the consumer can determine which policy is suited to their needs along with laying out the exclusions and key facts and telling the consumer exactly how much the cover will cost. For now if you want income protection the safest and cheapest way to purchase it is by going to an independent specialist provider for your cover, a specialist will not only save you money on the premiums each month but also give you the advice you need to ensure that a policy is suitable for your circumstances.

Three good reasons why you may wish to take out income protection insurance

If you have started to think about income protection insurance and why it may be useful to you then you may still be at the stage where you arent quite sure why yet. This kind of insurance policy was established to help those who lost their salary by giving them a replacement income. This may be useful in three ways.

So, for example, if you have an income protection insurance policy in place then you may qualify for your provider to pay you part of your salary as replacement income if you:

are unable to work due to suffering a specific illness;
cannot work because you have had an accident;
if you become a victim to redundancy and lose your job

It is possible for these three things may happen to any of us, at any time. After all there is no job security any longer. Nobody is able to predict illnesses that strike out of the blue or accidents that put them out of action for significant periods.

Without income protection insurance in place to cover these things happening you may have to rely on:

company benefits (if you (can apply)
state benefits/mortgage help (if you qualify);
any savings you may have in the bank

While you may wish to take a chance and rely on the above, they may not bring the peace of mind and security that a policy might. Not having a regular wage coming in, even for just a few months, may make it hard for you to pay your mortgage, meet any debt commitments and pay for your general living costs.

Adding money worries to the mix when you arent able to earn because of illness, accident or unemployment may not be a great idea. It may be that looking at this kind of cover might be useful if you want to avoid this happening.

What benefits might you typically get?

short term income protection (often called asu insurance which stands for accident, sickness and unemployment insurance) may give you a replacement salary for a short period of time if you become unemployed, get ill or have an accident. This policy type may typically last for 12 months and is designed to give financial support until you get back on your feet again. Benefits on offer may also include advisory services to help you find a new job;
If you wish to have an income over the longer term then you need to consider long term protection. Benefits typically offered with this cover will last for as long as the policy has been set up for or until you reach retirement age, die or find a new job (usually whichever comes first).

Were you to need to make a claim on your insurance the policy typically provides you with an income that is a substantial sum of your own income. This may be useful to have and may make the difference between having enough money coming in to meet your financial needs and having to worry about how make ends meet.

Is Your Income Protected

Our personal situations and circumstances can change quickly. One day you are fit, healthy, happy and working. The following day you might find yourself involved in an accident or suffering from a serious illness. Are you ready for the worst?

We are all happy to spend money on home insurance, travel insurance, insuring our belongings, our cars and our health. How would you pay your bills and look after your family if you couldn’t work due to illness? There are statistics which show that there is more chance of becoming disabled before reaching the age of 65 than of dying. But there are still many people who don’t take adequate steps to protect their incomes.

Anybody who works for around 20 hours or more per week should be able to take out an income protection insurance policy at a reasonable cost. These policies will give you a percentage of your current income if you can no longer work. So if you have bills to pay, a family to feed and a household to maintain I think one of these policies is essential.

It is worth noting that an income protection policy should cover mental disorders as well as physical incapacity. There are policies which don’t cover mental issues or problems related to the nervous system. It is a good idea to make certain that your policy protects you from any form of disability that would prevent you from making an income. Its worth ensuring that your income protection policy is flexible enough to support you if you are able to return to work on a part time basis.

Something else to consider with regard to income protection is what will happen if you change your job or employment. Be certain to ensure that your policy will allow you to change your job or employer.

Everybody thinks that the worst will not happen to them but 27,000 people each year leave employment due to ill health or injury and never return. You need to make certain that your family are protected if you are suddenly unable to work.