Income Protection Insurance

What is Income Protection?

Income protection insurance is a type of policy that replaces a portion of your income if you are unable to work due to illness or injury. It provides you with a regular income stream to help cover your essential living expenses and maintain your standard of living, while you are unable to earn an income. This insurance typically pays out until you are able to return to work or reach the end of the policy term, whichever comes first.

Why is Income Protection Insurance essential for financial security?

Income protection insurance is a vital tool that provides you with financial security in the event of illness or injury. It ensures that you can continue to meet your financial obligations, such as paying bills and your mortgage, even if you are unable to work. In this article, we will explore what income protection insurance is, why you need it, the potential consequences of not having it, the benefits it offers, and what it covers you for. By understanding the importance of income protection, you can make an informed decision to safeguard your financial well-being.

Why do I need Income Protection Insurance?

Illness or injury can strike at any time and the consequences can be devastating, both physically and financially. Without income protection insurance, you may find yourself struggling to make ends meet and facing significant financial hardship. Here are some key reasons why you need income protection insurance:

1. Protecting Your Health: Income protection insurance ensures that you can prioritize your health and recovery without the added stress of financial strain. It allows you to focus on getting better rather than worrying about how you will pay your bills or keep a roof over your head.

2. Mortgage and Bills: If you have a mortgage or other financial commitments, income protection insurance ensures that you can continue to make these payments even if you are unable to work. This prevents the risk of losing your home or accumulating significant debt.

3. Absence from Work: Income protection insurance provides a safety net for those who are self-employed or do not have access to sick leave or disability benefits through their employer. It ensures that you have a source of income during periods of absence from work due to illness or injury.

4. Bills To Pay: Your everyday living expenses, such as utility bills, groceries, and transportation costs, continue even if you are unable to work. Income protection insurance helps cover these essential expenses, allowing you to maintain your quality of life.

What could happen if I don’t have Income Protection?

Not having income protection insurance can have severe consequences for your financial well-being. Without this essential coverage, you may face the following challenges:

1. Financial Hardship: Without a source of income, you may struggle to meet your financial obligations, resulting in mounting debts, missed payments, and potential eviction or foreclosure.

2. Draining Savings: If you have savings, you may be forced to deplete them to cover your living expenses while you are unable to work. This can leave you financially vulnerable in the long run and without a safety net for unexpected emergencies.

3. Reduced Quality of Life: The absence of income protection insurance can significantly impact your quality of life. You may have to cut back on essential expenses, compromise on healthcare or rehabilitation services, and experience increased stress and anxiety.

4. Dependency on Others: Without income protection insurance, you may have to rely on the support of family or friends to meet your financial needs. This can strain relationships and create a burden on your loved ones.

What are the benefits of Income Protection Insurance

Income protection insurance offers numerous benefits that provide you with peace of mind and financial stability in times of need. Here are some key advantages of having income protection insurance:

1. Replacement Income: Income protection insurance replaces a portion of your lost income, ensuring that you can maintain your financial commitments and cover your essential living expenses.

2. Flexible Coverage: Income protection policies offer flexibility in terms of coverage duration and payout options. You can tailor the policy to meet your specific needs and financial circumstances.

3. Tax-Free Payments: The benefits received from income protection insurance are typically tax-free, providing you with the full value of the payout to support your financial needs.

4. Peace of Mind: Knowing that you have income protection insurance gives you peace of mind, knowing that you are financially protected in the event of illness or injury.

What does Income Protection cover you for?

Income protection insurance covers a range of illnesses, injuries, and disabilities that prevent you from working. The specific coverage will vary depending on the policy you choose, but it typically includes the following:

1. Illness: Income protection insurance covers a wide range of illnesses, including cancer, heart disease, stroke, mental health conditions, and chronic illnesses that prevent you from working.

2. Injury: Whether it’s a workplace accident or a sports-related injury, income protection insurance provides coverage if you sustain an injury that leaves you unable to work.

3. Disability: If you become disabled and are unable to perform the duties of your occupation or any occupation for which you are suited by training, education, or experience, income protection insurance will provide coverage.

4. Accident: Income protection insurance also covers accidents that result in temporary or permanent disability and prevent you from earning an income.

Income protection insurance is a crucial component of your financial security. It ensures that you have a reliable source of income in the event of illness or injury, allowing you to meet your financial obligations and maintain your standard of living. Without income protection insurance, you risk facing financial hardship, draining your savings, and compromising your quality of life. By understanding the benefits and coverage provided by income protection insurance, you can make an informed decision to protect yourself and your loved ones.

I have a pre-existing medical condition, can I still get Income Protection?

When you apply for Income Protection Insurance, you will need to declare any pre-existing medical conditions. Depending on the severity and type of pre-existing condition, you can expect one of three outcomes:

– The Condition will be covered on standard terms.

-The Condition will be covered but the monthly premium may be more expensive.

-The Condition is excluded

The more serious the existing medical condition, the more likely it is to be excluded and some insurers treat some medical conditions differently to others. Here at The Mortgage Masters, we have direct access to underwriters so can discuss your medical history with them to get you the best possible cover.

In some instances, if your medical history is complex or you have serious underlying conditions, it may not be possible to get Income Protection Insurance.

How long do I have to wait before I can make a claim?

Most policies have a deferred period. This means that you have to wait a minimum of four weeks before the policy pays out in the event of a claim. The monthly premiums are cheaper, the longer the deferred period.

How much Income Protection can I get?

The amount of Income protection you can claim, depends on the amount of money you earnt before you had to stop work. It will not fully replace your income. With short term plans (paying for up to 12 months) the majority of insurers will cover you for a maximum of 65% of your gross (pre tax) income. However, for long term protection plans (which can pay out until retirement age), most insurers will only cover 55% of gross earnings.

Can I make a claim if I’m made redundant?

No- Income Protection Policies only cover you if you are unable to work due to illness or injury.

Don’t wait until it’s too late; speak to The Mortgage Masters and secure your financial well-being with income protection insurance today.