What Is Income Protection And Why Might You Need One

Managing finances has always been a struggle regardless of your financial status and capability. Moreover, many things out of our control affect our finances, like illnesses and accidents, no matter how thorough we prepare. Therefore, despite having so many essential expenditures, there are numerous risks we have to consider.

What is Income Protection?

Incom protection is insurance that helps you, an employee, secure your income by ensuring a specific percentage of your pay depending on your preferred value.

How Does it Work?

An employee can reap multiple benefits from income protection. Firstly, if you cannot work due to illness or accident, you can still receive a payment that is replaced with your original income until you can work again. The company will give it to you until you return to your work. Second, it covers most illnesses or accidents as long as it validates your absence from work. Third, it can be short-term or long-term, depending on your circumstances. Lastly, the benefit period lasts 2-5 years or until you reach 65, but the selections vary.

Though it is similar to critical illness insurance, the difference in income protection is it pays multiple times. On the other hand, critical illness insurance awards a one-time sum if you have a severe illness or accident.

When and Why is it Needed?

Having a steady career doesn’t necessarily equate to stability in life. Uncontrollable things such as accidents and illnesses are inevitable circumstances to consider. Should such things happen, you will not be able to pay your essential expenditures such as a mortgage or rent and bills. Therefore, you need to check your employer’s offers to make the most out of the advantages, but it does depend on your savings and income.

There are three key benefits of income protection: the premium pause, partial disability, and total disability coverage.

The premium pause is applicable for employees’ full-time study, parental leave, or compassionate leave.

The partial disability benefit provides perks similar to a total disability, but you are expected to return to work with less capacity than before.

Lastly, the total disability is for people who become entirely disabled and will receive monthly benefits, thus replacing the share of the employee’s lost income.

However, it can be difficult if you are self-employed since you cannot rely on income protection alone once you stop working altogether.

How To Have One?

It would greatly depend on your job or the corporate field you’re in. But in most cases, it is recommended to ask for a financial adviser. They can explain to you in great detail the available policies, and which of them are applicable or ideal to your situation or economic status.

Things to Consider Before Getting Income Protection

Though you might need one, there are various things to consider before its acquisition since this is not ideal for everyone. First, thoroughly assess your current situation and learn about the application process of income protection with their respective providers. From there, choose a level of coverage suitable for you, be honest with your medical records, carefully read the necessary documents, make sure your files are presentable, and remember you only have 30 days to change your mind.