What Is Income Protection Insurance And How Does It Work?

Income Protection Insurance

In the same way you protect your house, car and life by buying insurance, you can also protect your income the same way.

Employment is an aspect of your life which you don’t have total control of, because something may happen and you find yourself without a job.

The cover you take out to protect your job is called income protection insurance. In order to avert any hardship you and your family may face when you lose your job, it is best to protect your income.

So, what is income protection insurance and what does it entail?

How does income protection insurance work?

When something happens and you can no longer work, income protection insurance cover will replace some of the monthly salary you used to get. The company that offers the insurance will give you different packages to choose the best one that suits your situation. You can choose the period to be a few months or for a lifetime. You will then pay monthly premiums, usually a percentage of your earnings.

How much does income protection insurance cost?

Now that you know what income protection insurance cover is, you need to know how much it will cost you to get one. There is no set value for this insurance; it varies with different factors namely:

The type of work you do

If you work in a job with high risk, you will end up paying more to protect your income. This is because the likelihood that you will claim is high. Jobs that don’t involve manual work will attract a lower premium.

The waiting period

If you choose a package that has a long waiting period, you will pay lower premiums. Choose a longer period if you know you can survive on your savings for extended periods of time. If you know you cannot survive for long without payments, then go for a shorter period.

The annual income

The income insurance is usually calculated on all forms of income that you get. This also depends on the policy that you have chosen. To get a proper estimate click here because you need to declare all elements of your income.

Your gender and age

Women are more likely to retire from work early as compared to their male counterparts. This makes them pay more premiums for income protection insurance cover.

As a person gets older, their body becomes weaker. They are therefore at a higher risk of leaving work as compared to younger people. They end up paying more for income protection insurance. Read: How to Find Affordable Life Insurance for Seniors Over 70

What characterizes inability to work under income protection insurance?

As a policyholder, your insurance will mature when one of the following situations happens:

You are self-employed and unable to do any work. You may also be unable to do any other type of job due to an accident or illness.

If you trained in a given field and due to illness, you are unable to undertake your tasks.

If you are in no condition to hold any job due to an accident or disability.

If you are unable to perform your daily activities such as dressing and washing due to an accident or illness.

The major benefit of income protection insurance is that it covers several problems including sickness, accidents and illnesses.