In any life situation you want to make sure that you are taken care of. The sad truth of our modern era is that many people are still living pay check to pay check and can barely afford to live life as it is. If the worst should happen and you end up out of work then you would want to guarantee that your finances would not be devastated and reduced to a perilous state.
What is Income Protection Insurance
Income protection insurance offers coverage in the event that you are unable to work for an extended period of time. There is a common misconception that the only insurance worth having is life insurance, however, life insurance only pays out on death or permanent disability. During your life you are more likely to end up being out of work for an extended period of time because of an illness or an accident, in which case life insurance would not offer you the coverage that income protection insurance guarantees.
For a moment you might be thinking, “This sounds like a commercial.” well that’s kind of true. Much in the way that asking you to watch what you eat is a commercial. For some people it’s common sense and for others it sounds like someone is trying to sell you something that you need. If you have never been part of the long term unemployed you may not have even considered the need for this type of coverage. If you have suffered from joblessness you likely understand the advantages of such a policy.
Income Protection not Unemployment Insurance
This coverage is not unemployment insurance, it isn’t meant to be an excuse for taking an extended vacation from work. Income protection is specifically for extended lengths of time where you are unable to work because of an accident or sickness. Some people might think that this is unnecessary, that there couldn’t be anything in their safe and cushy job that might take them out of the daily grind for more than a day. It could be a bad flu bug, carpal tunnel, or a freak accident at work that takes you out of commission.
When you are sidelined from your normal work you may get a certain amount of pay in the form of disability benefits, but this may not come close to the income you have come to rely on in your daily life. This is where income protection coverage steps up. The payable benefits of income protection insurance can help make up the difference, up to 75% of your normal income level (after taking into account all of your other payable benefits.)
Again, this is not a long term solution to making money when you are out of work, most income protection plans only cover from one to two years. Some policies may pay longer (such as up to retirement age) for serious problems that may mean being unable to ever return to work.
Cost of Protection
The cost of this protection is not something that reaches beyond affordability. It is calculated based on your income over the twelve previous months. This means that it can actually be affordable for a wide range of incomes.
The intention here is not to make you paranoid and worry about losing your job. If something does happen though you would certainly want to be protected and have a backup plan in place. There’s an old saying that applies in this case, that it is better to have it and not need it than to need it and not have it.
Look forward to a long and healthy working life, but live safer knowing that you worked to protect yourself and your family.