Income protection insurance prevents loss of earnings through sickness or injury. It means that if you’re disabled to work for some time, you will still get payments in place of the lost profit. The low income protection insurance covers all periods leading up to the time you become unable to work, providing that you had a stable source of income and paid the premiums.
This type of coverage acts as a salary replacement in a sick or injured person’s case. Typically, these payments are up to 70% of your average yearly earnings. You’ll get these refunds within a pre-determined time frame, depending on whether you’ve opted for short or long term coverage. The benefit period can vary, with some policies starting from the day you sign up redundancy while others start from sixty days.
Peace of Mind When You Can’t Work
What is the purpose of taking out income protection insurance? It is to ensure that your monthly income doesn’t get depleted when you become ill or injured and can’t work. That is possible to happen, especially if you are doing risky business.
If you don’t have income coverage, your employer would have to take out an income supplement policy to ensure you. In order to do this, they would have to give you a lump sum payment or benefit and use this money to look after your expenses.
Besides covering your living expenses when you’re unable to work, income protection insurance also provides you with the extra security. If your total disability or illness is prolonged, you will still be receiving payments in place of being unable to work.
When you reach a certain level of income and your insurance reaches its end of payout, the payments will cease until new arrangements are made for your continued benefits. The way you decide to continue paying is entirely up to you. But it’s worth thinking about what might happen should you become unable to work for an extended period.
Safety Net for Redundancy
In uncertain times, people’s biggest fear is that they will lose their jobs. It means entering the daily struggle and uncertainty about how you will provide the basic living conditions. After losing a job, it’s important to find a new source of income. But it’s also imperative that this period is as stress-free as possible so that you can gather yourself and focus on moving on.
Income protection insurance, sometimes called safeguard cover, will help you deal with your expenses when you can’t earn a specified amount of money. That means that you can be carefree, at least for a while. You can concentrate on finding a better job instead of worrying about how you’re going to pay your bills.
Below are some tips to help you deal with unexpected job loss:
The main advantage of income protection insurance is that it protects your monthly income from falling into arrears. The way it works is that the premiums you pay are invested in a super fund, which is meant to cover any eventuality. The super fund has a fixed rate of interest, likely to stay in place until a pre-set date.
At that point in time, you will receive whatever your super fund is worth, providing you didn’t use it at all. It’s like a smart saving that you can always rely on. Also, you can use these premiums for child care without losing any part of the monthly income due to not-attending the job.
Customized Insurance Policy
While this type of cover may provide protection, you need to be sure that it’s the right product for you. In particular, you need to consider whether you would be better off keeping the cover as a part of your life insurance policy. There are several reasons why this could be a good idea.
Firstly, it may allow you to lock in at a cheaper premium than you could get elsewhere. While the cover may be more expensive initially, it could prove to be a good investment over time. You can tailor the protection to suit your particular needs.
The benefits of income protection cover are that you do not have to worry about paying premiums if you don’t earn an income for some time. We could be talking about years, depending on the policy you have. But that will depend upon the insurer you purchase the cover from.
When you choose to take out income protection, it’s worth checking whether your insurer has any special offers. Typically these include a saving account or great interest deals. Also, you may be able to choose a super fund cover that accumulates savings over the years.
If you want to take out both perks, it’s worth asking your insurer what the cover terms are. In particular, the super funds cover can accumulate considerably faster than a standard life insurance cover, so it is important to know what savings are possible. You should also check that your insurer has any special premiums attached to it.
What to Pay Attention to?
Some insurers offer a level premium on the cover. It means that no matter how low your monthly premiums are, you will have to pay a standard rate for your life insurance policy. On the other hand, some insurers charge more than the standard premium but offer a lower rate if your premium is paid in full at the time of the policy expiry.
The premium you receive if you pay income protection insurance regularly is not taxable (for now). Keep in mind that laws change frequently, so it’s a good idea to check this information before you decide to use it according to your needs.
If you depend solely on your salary and have high bills and debts, these could bring you extra difficulties if you don’t pay them on time. As most people are in this situation, income insurance protection is an excellent thing to have. If your earnings are low or your employer doesn’t offer this type of cover, it may also be worth investing in it.