Everything You Need to Know About Income Protection Insurance

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There are hundreds of different types of insurance policies available on the market. The purpose of an insurance policy is to provide protection and coverage in case something that’s specified in the policy does or does not happen. One of the most common types of insurance policies available today is medical insurance. In the case of an illness or an injury, the insurance policy covers the costs of treatment and the payment for any medication.

However, another very popular kind of insurance policy available to people today is income protection insurance. Income protection insurance is generally offered to people in countries such as the United Kingdom, South Africa, Ireland, New Zealand and Australia. Previously, these policies were known as permanent health insurance policies.


What Is Income Protection Insurance?



What Is Income Protection Insurance?

More and more insurance companies have now begun to offer income protection insurance. These policies are designed to offer benefits to people who are incapacitated or permanently disabled, which makes it difficult for them to work. As you can probably understand, income protection insurance policies are generally designed for people who are working in high-risk industries. For instance, if you are working as a construction worker, you should probably consider applying for this policy.

The policy is designed to protect your income. If you are the sole breadwinner in your family, a permanent disability could leave all your plans in tatters. In fact, without a proper income protection policy, you will not even be able to provide for your family. However, it is important to note that income protection insurance policies don’t always kick in after a person is permanently disabled.

Not all injuries lead to permanent disabilities. In most cases, the patient is just sent home to rest for the duration of a few months until they are able to get back on their feet again. However, how are you going to provide for your family during these few months? You will obviously need an insurance policy if you are working in a dangerous environment. In certain organizations, it is necessary to get coverage (or have the organization provide insurance benefits to its employees) before you can start working.



How Much Coverage Does It Provide?

Most income protection insurance policies provide up to 75% coverage depending upon your gross income. When you first contact an insurance agency and ask about its terms and conditions, it will ask you to fill out a form in return. Here, you will have to provide details about your employment, nature of work, risk involved, history, experience and any qualifications that you may have.

Needless to say, having coverage is essential if you want to protect yourself and your family. However, there’s no reason to pay a fortune for a premium if you want to get an income protection insurance policy. There are obviously a series of different factors that are used by insurance companies in order to calculate the premium charged by the company. It’s best to look out for certain traps that most companies might use in order to reel you in and coax you to a settle for a higher premium. Here are some tips that will help you find the best insurance policy depending upon your needs.


Avoid Policies with a Limited Benefit Payment Period



Avoid Policies with a Limited Benefit Payment Period

One of the most important pieces of advice that you should always keep in mind is that when it comes to buying an income protection insurance policy, always look for policies that don’t have a limitation on the payment period. Nobody plans for accidents and injuries in their lives. You never know the severity of an injury until after it has occurred, so it would be a foolish idea to purchase an insurance policy that only provides coverage for a limited time period. One of the most common policies available on the market offers accident benefits up to the age of 65 and illness benefits up to two years after the diagnosis.

Of course, if you have bought a policy, it would be a wise idea to dig up the document and read the description mentioned in the policy about what really constitutes an accident or illness. A number of long-term disability claims stem from accidents that were not properly treated.



Guaranteed Renewable or Not?

You should always avoid buying income protection insurance policies that are not guaranteed renewable by your insurer. It is important to note that income protection insurance policies are wildly different from home or vehicle insurance policies. What if your income protection coverage runs out? The chances of being able to find a new income protection insurance policy at a time when you can’t even work and are dependent upon the payments made by the insurance company are quite slim. This is the time when you will require protection most, so make sure you cover all your bases. Don’t buy an insurance policy that isn’t guaranteed renewable by the insurer!



Read the Documents

When you first approach an insurance agent, they will generally try to bury you in lots of documents in order to convince you to buy the policy. Rather than be bullied into the decision, it is a wise idea to take your time. Compare policies from different insurers and carefully go through the definition listed on the website about what constitutes an accident and an illness. You should immediately cut out policies that don’t provide clear and vivid descriptions of these terms.

Some policies generally consider disabilities, depending upon the effect that the disability has on your income. Others will follow a “duties-based” definition, determining the definition depending upon whether you can perform your duties after sustaining the injury. Make sure you go through the documents carefully, and consult with an independent expert before making a decision. You don’t want to be stuck with a vaguely worded policy that denies you benefits when you most need them!