Otherwise known as salary continuance, having income protection means you can still manage your expenses and debts during a period of hardship, even if your sick pay has been completely used up.
Most income protection insurance usually covers you for up to 75 per cent of your regular income until you return to work.
Income protection provides a great safety net to bounce back on, but there are always the pros and cons to consider with such a big financial decision, so make sure you do your research before dismissing or committing to it and also get a advice from expert financial advisers.
Peace of mind
In the event that you did encounter some hardship and had to take leave from work, having the safety of income protection lets you focus on healing, instead of stressing over your everyday expenses. It will also reduce the stress you may experience concerning your family, as you will feel secure knowing they will be supported even if you can’t work.
If you are worried you wouldn’t be able to pay off your current debts, you can change the duration of your cover, allowing you to opt for a shorter term payout period.
In the event that you have been able to pay off your debts, you will no longer be too stressed about getting help from a third party, even if your main source of income no longer exists.
Alternatively, if you would prefer the option of longer cover, taking out a five year payout period is an option.
This means you will continue to get payments throughout the duration of those five years that you are not working, so you can also rest easy knowing your family is provided for if you lose your job or are unable to work.
If you own a small business
Income protection insurance for a small business is a valuable investment, as it can prevent your business from being put at risk if you have to stop working unexpectedly from sickness or injury.
Pre-existing health condition
There are certain medical conditions you need to declare, and if this is the case for you you will find that the amount you have to pay on your premiums will be affected, especially if the medical condition increases the possibility of you taking time off work.
Other factors that can potentially affect your payment amount includes your gender, occupational risks, working in a high risk occupation or environment and smoking status.
The sooner you get income protection insurance the better, as most income protection insurance policies have a waiting period. This means that if you fall sick before the waiting period is over, you will have to rely on sick pay to support you until you are entitled to the income protection insurance. Waiting periods vary from company to company, and can be around 60 – 90 days. Designed to bridge the gap between pay days, income protection takes into account sick leave. The reasoning behind this is because if you are receiving payments from your employer, it is understood that you do not require additional assistance. Of course once your sick days have run out, you want to make sure you have a backup plan and financial safety net. This is where income protection insurance can help.