Income protection insurance is also known as permanent health insurance. This policy pays out a regular income in cases when the insured person is not able to work due to disability or sickness. The payments are carried out until the return to work or retirement.
The policy won’t provide you with the exact amount of your salary before you were forced to stop working. Typically, the payments are of about half or two-thirds of your earnings before tax. The good news is that, the income from policy is not subjected to taxes. The amount you get paid out may be influenced by payments from your other policies as well as other sources of income, like state benefits.
The income protections insurance’s instalments won’t be paid to you straight away after you fell ill. Typically, payments start around four weeks after you make a claim, but in some cases, you have to wait to up to even two years before getting regularly money. This is called the waiting period. The reason for that is the fact that first after you fell ill, your employer gives you sick pay or you can also get statutory sick pay for up to 28 weeks. Some insurers offer cheaper premium, the longer the waiting period lasts.
Premiums in this type of insurance are usually high. Bear in mind, that you might never use the income insurance cover. You can’t get back the money put for premiums in such instances. The level of premiums proposed by the insurer is affected by factors like age, sex, type of job, hobbies and lifestyle and the waiting period.
The insurance doesn’t always cover every type of illness. Additionally, if you or one of your relatives has had a certain medical condition beforehand, you might be excluded from receiving payments. It is a clause of pre-existing medical conditions. Also, some insurers don’t guarantee income payments when you are not suitable to do your job, but still are well enough to undertake other. In other words – you might stop being able to do your daily job, but you can’t make a claim if insurer decides you are healthy enough to find yourself other type of work. Always check the insurance policy to find out if such entries are in it.
Before deciding to get yourself income protection insurance, consider what other insurances you already have. Sometimes your employer provides income protection as part of benefits package. You might have already illness insurance, for instance, if you have mortgage.