Income protection insurance is an income security cover provided to people in case they are unable to work for a specific period as a result of an injury or illness. Through this insurance, a policyholder can receive up to 75% of his/her salary in case s/he is temporarily out of work due to physical ailment or trauma. The main aim of this insurance is to ensure that a policyholder can continue to pay his/her mortgage, and provide food to his/her family members till the time s/he is fit to return to work.
Income Protection Insurance: Tips
Due to its focus on providing an income stream when a person is unable to earn due to some ailment, income protection insurance should be considered by all working people. This insurance provides supplementary income for the duration specified at the time of buying the policy. The term of payment benefit can range from a couple of years to retirement age (60 or 65 years).
When buying an income protection insurance policy, consider these key factors:
The time for which the policy will remain active.
The injuries that are covered under this policy.
The things that are excluded from the policy. While some policies accept a claim if a policyholder is unable to perform his/her normal occupation, others pay only the policyholder is unable to perform any occupation.
The amount that will be paid on submitting a claim.
The existing insurance premium.
If the premium increases at a later date.
Offset clauses that enable the insurance company to reduce the payout in case you are eligible for benefits from other sources, like sick pay from your employer.
The waiting period between filing a claim and receiving the first payment. Usually, the waiting period is between 30 and 90 days.
Other important tips while buying an income protection insurance policy:
Buying a non-cancellable policy will help you maintain your premium. In a cancellable policy, a company can reassess a policyholder’s health each time the policy is renewed and may refuse to continue the policy.
Buy an income protection insurance policy with index-linked premiums. This will help you increase the cover in line with the inflation rate.