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Income Protection Insurance

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Income protection insurance can prove to be invaluable if you lose your job or if you become ill. Many people simply wouldn’t be able to cope if they were to lose their monthly wage; even if it’s just for a month or two. Income protection insurance can give you a real peace of mind. However, there are different types of policies you need to be aware of. It’s important you choose the best one to suit your circumstances.

Different types of policies available

There are three main types of income protection insurance available. These include:

  • Accident, unemployment and sickness
  • Long term cover
  • Short term cover

If you apply for accident, unemployment and sickness insurance, you may be required to attend a medical screening. This is one of the cheapest policies available, though it’s not guaranteed that you’ll be covered when you make a claim. The medical isn’t fully underwritten at the point you take out the insurance so this is something you need to be aware of.

Long term cover is one of the most popular due to the fact it pays out until you return to work, until retirement or until death. Underwritten when you apply for the policy, you know what you are covered for right from day one.income protection insurance

Short term insurance is just like long term insurance, only it doesn’t pay out for retirement or death. It actually features a fixed pay-out time limit of between one and five years.

Understanding the costs

Choosing the type of income protection you need is only step one of the process. You then need to choose the actual price base you need. These include guaranteed, reviewable and age-related policies.

Guaranteed policies will basically stay the same throughout the length of the policy. What you pay to start with won’t change at all unless you increase the cover. These provide you with a peace of mind as you know exactly what you will be paying.

Reviewable policies are looked into after a certain time period. It’s usually every 5 years and the premium tends to increase with each review. This makes them a little more affordable than guaranteed policies to start off with.

Age related policies are suitable for people working in a high risk job. Smokers are also included in this category. The good thing about this type of income protection is the fact that it starts off cheaper than both guaranteed and reviewable policies. The only downside is the fact it will increase each year.

Things to keep in mind

The main thing you really need to know about income protection insurance is that there is no one policy to suit everyone. The premiums will differ based upon a range of factors. These include your age, gender, medical history, job and whether or not you smoke. How risky your job is will be a particular factor the insurer looks into.

Income protection is definitely worth considering – you just need to ensure you’re choosing the best policy to suit your needs. Compare a few different insurers before you make up your mind which one to go with.

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About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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