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What is Income Protection?

Updated: Oct 22, 2020

Income protection is an insurance policy that will protect / cover you against loss of income due to unemployment, illness or accident.

It could provide you with a tax-free income, depending on the policy, and could continue to pay out until you are able to return back to work or retire, again this would depend on the policy.

Upon selecting your policy (in some countries known as ASU, or accident, sickness and unemployment insurance), there are essentially 3 main cover features for you to choose which is the most suitable for you.

They will determine how the policy works, and when it may pay out.

You'll need to choose one of the options below:

Accident and sickness - cover against accidents and short or long-term illnesses that leave you unable to work

Unemployment - cover if you lose your job through redundancy or involuntary unemployment

Accident, sickness and unemployment - includes all the above.

These insurance policies are designed to help you pay your bills if any of the above should happen, so that you can maintain your standard of living while you're not able to work.

By paying a monthly premium, if any of those circumstances were to happen, your policy would kick in to allow you to cover your bills, such as your monthly mortgage or rent, loan/credit card repayments or utility bills.

It’s really important to note that income protection WILL NOT cover pre-existing conditions, most back and stress-related conditions, unemployment due to misconduct, or voluntary redundancy.

So, what are the benefits?

It really depends on the income protection policy, there are different benefits available such as:

Accident insurance - if the policy is tailored for this, it will cover you, should you be unable to work after having an accident or prolonged illness. The policy could pay a % of your monthly gross income and is designed to cover your main financial commitments like your mortgage or rent and household bills etc.

Bill protection - this does exactly what it says on the tin, it covers your monthly outgoings like loans, credit cards and household bills. This policy typically runs for 12 months and will start if you have an accident, a prolonged illness or become unemployed (as long as you've selected the right type of cover)

Loan protection - if you're unable to work because of having an accident, having a prolonged illness or becoming unemployed, this policy could cover your loan repayments and other financial commitments

Home Loan protection - much like the others, this policy comes into effect if you're unable to work due to an accident, sickness or unemployment. At that point, it could pay your mortgage repayments during your absence of work.

Salary protection - this policy could replace up to 70% of your salary, if you are unable to work due to an illness, accident, or become involuntary unemployed.

Sickness insurance - a sickness policy could provide you with short-term cover for up to 12 months, while alternatively, a long-term policy could cover you right up until retirement age, this could give you up to 70% of your salary, should you become sick long-term

Unemployment protection - if you've become involuntarily redundant, this could give you a % of your gross income each month, for up to 12 months or until you find another job. However, this wouldn't cover you if you've been let go for under-performing, dismissed, or if you decide to leave

Long, or short-term.

There are two main different types of income protection policy, long-term and short-term. You can pick which you'd prefer during your quote, but what's the difference?

Long-term - these policies can give you a tax free regular income until you're able to go back to work or you retire

Short-term - typically, these policies will only pay out for up to 12 months rather than until you're fit to return to work, or retire (i.e. a long term policy)

Redundancies, injuries or debilitating illnesses can come out of nowhere. If any of these were to happen, you'd still need to pay your mortgage or rent and bills. Having the right type of insurance in place could help to cover those bills until you're ready to return to work*. While your policy is paying you a regular amount of money, depending on who your policy is with, you may still able to claim sick pay and any other benefits you're entitled to.

*Depending on your policy, this could be limited to 12 months, or on a long term policy, until you retire.

It's all in the underwriting.

Max Insurance Brokers comes in by assisting you in establishing what exactly you require from an Income Protection insurance.

Contact Us by clicking HERE to get the process started.


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