Income protection insurance pays out a lump sum to any policy holder who, for whatever reason, has seen a sudden decrease in their income. It replaces part of your normal income while it is depleted and keeps paying out until your circumstances return to normal.
Income Protection Insurance is comparable to:
- Critical Illness Insurance
- The policy holder receives any and all pay-outs made from the insurer
- It is different from critical illness insurance, though, in terms of payment schedule. The policy holder is not offered a lump sum from the insurer. Instead, you would receive monthly payments, which are a percentage of your normal wage. The amount you are paid each month is decided by you at the start of your policy
- Income protection insurance is also notably different to critical illness insurance in that if you were to become suddenly redundant, you would still be able to meet your financial commitments. You do not have to have been injured or fallen ill
Not to be confused with:
- Term Life Insurance
- Whole of Life Insurance
- Mortgage Life Insurance
- Mortgage Payment Protection Insurance
- Over 50s Life Insurance
All of these policies are designed to look after your beneficiaries in the event of your death. Income protection insurance is paid directly to the policy holder.
Income protection insurance can really help if:
- You or any other member of your household have no other form of investment or reserve funds
- You have concerns about the period of sick pay offered from your employer – most people set their payments from the end of their sick pay period so they are able to carry on their recovery period without the extra financial worry
- You would be seriously disadvantaged as a result of mounting monthly outgoings, such as mortgage payments
- Yours is the main income of the household and you have financial responsibility to dependants
- You work in an industry that is inherently financially risky
Income protection insurance can really put your mind at ease when it comes to protecting yourself and your family. If you are considering safeguarding your financial situation for a rainy day, we are here to help with any queries or concerns you may have.