Income Protection Insurance Guide: Benefits, Coverage & Policies – What You Need To Know

What happens if you lose your job or become critically ill? Income protection insurance can provide coverage for up to 50-85% of your salary – short term and long term. Income protection insurance is sometimes known as “permanent health insurance” and it safeguards people from job loss or unpredictable accidents. This insurance policy is available in the UK, Australia, New Zealand, Ireland, and South Africa. In the United States, you may hear the term Disability Insurance instead.

Millions of people find themselves unable to work due to a minor or critical injury. If you’re unable to work for any reason, income protection insurance will allow you to pay the bills without having to survive on savings. This guide will highlight the benefits of income protection insurance, who it’s for, and the different policies available.

How Much Does Income Protection Insurance Cover?

  • Income protection insurance plans cover insurance offers a maximum of 85% of their gross income for a specific amount of time if they’re incapable of working due to a job loss, minor injury or total disability.
  • The plans can cover a person for 1-2 years in the short term or 5+ years in the long-term, depending on the coverage they purchase.
  • Each policy can be customized to cover partial or total disability for the insuree.

Top 5 Benefits Of Income Protection Insurance=

✔ Covers up to 85% of your current gross income until you’re capable of working again or the policy expires. Payments arrive on a regular basis.

✔ Coverage for all unable to work – regardless of whether you’re healthy and lost your job or you’re injured/disabled and incapable of working.

✔ Long-term policies can pay out for years until you’re ready to start working again. Certain policies may include coverage until you retire or pass away.

✔ Immediate payments – as soon the sick leave payments end, the insurance company must start paying you out without a lapse period as soon as you’re left without income from the company.

✔ Unlimited claims – while the policy lasts, you retain the ability to file multiple claims with the insurance company.

Who Needs Income Protection Insurance?

Income protection insurance policies are designed for people who have dependents or self-employed persons who are incapable of working after an injury or job loss. Consider taking out a policy if you belong to one of the following groups:

  • Parents who have dependents such as children, spouse, or older relatives that may be directly affected by your income loss.
  • Self-employed/small business owners who may not be entitled to sick leave or annual leave benefits.
  • Single persons who have a mortgage or debt which they have to make payments on if they’re incapable of working.

Pro Tip: To decide how much income protection insurance coverage you need, consider the most important monthly expenses you have to cover. Factor in whether the insurance policy covers you for essentials such as mortgage payments and utility bills – and adjust the coverage accordingly.

Income Protection Insurance Policies: Top 4

  • Unemployment Income Protection Insurance: The most basic income insurance protection plan, this plan provides a replacement income on a regular basis to the insured person. The company starts paying out monthly tax-free income after a certain period when you leave work (which is negotiated in advance).
  • Permanent Health Insurance: ‘PHI’ is an insurance policy similar to unemployment cover insurance and covers you for a portion of your current income. Note: This policy does not replace health insurance that covers medical costs, but it is a long-term policy designed to cover you financially until you reach retirement age – for greater security over the long run.
  • Accident Cover Insurance: This policy is designed to cover you in the event of an accident or critical illness that renders you incapable of working again. Most accident/sickness cover policies provide up to 2 years of income coverage.
  • Accident, Sickness, And Unemployment: The ‘ASU’ bundle policy is a policy that covers all possible accidents and/or job loss. This policy provides the highest income coverage – sometimes up to 85% of your income.

Can You Get Short-Term Income Protection Insurance?

Yes, income protection insurance policies are available on a short-term and long-term basis. Both policies provide similar coverage for critically ill/injured clients, however, the difference is that short-term policies are available for 1-2 years whereas long-term policies cover you for a much longer period (5+ years). Long-term policies are can ensure you for serious consequences that may render you incapable of working for a longer period of time and they tend to start from 5 years until you reach retirement age.

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