Income Protection Insurance: Why Do You Need It?
In a world where it seems there’s an insurance policy for almost every eventuality, it’s easy to get overwhelmed by choice, and unfairly sideline cover which could actually be immensely useful.
We all know that things like home insurance, car insurance and life insurance are a good investment, protecting ourselves and our families from undue financial distress.
However, income protection insurance definitely falls into this misunderstood hinterland. So what benefits does it offer, and why should you consider buying it?
The Future Is Unknowable
As with all types of insurance, income protection packages are designed to shield you from the unexpected; in this case, the specific scenario of being unable to work as a result of an illness or a disability.
While you might be fit and healthy now, anyone could get struck down by a disease or injured in an accident, and thus be incapable of continuing to fulfill their obligations to their employer.
If your income is used as the main of paying for household expenses, such as the rent or mortgage, then any kind of disruption like this could be disastrous.
Income protection insurance steps in to soften the blow, and while most policies won’t pay out your full salary month by month, they will provide a healthy portion so that you can get by until you are well enough to return to work.
It Protects Your Savings
The concept of saving for a rainy day seems designed specifically to help you out when disaster strikes and you cannot get on with your job as normal.
However, there is a lot of uncertainty and risk involved in simply assuming that if you put away money each month, you will have enough saved up to tide you over if you become ill or disabled.
Income protection insurance is essentially a means of eliminating the risk, and leaving your savings intact as a result.
Obviously there are costs to pay for the insurance itself, which will leave you out of pocket if you never need to make a claim on your policy.
However, for risk-averse individuals who are wary of leaving themselves at the mercy of their savings, or those of family and friends, income protection insurance is the obvious answer.
It Lets You Live Your Life Unhindered By Money Worries
Let’s say that you are saving regularly and you also know that if you were unable to work, there would be government benefits available to ensure that you didn’t become destitute immediately. Even in this scenario, you’d still find that your quality of life was negatively impacted.
Paying for those little luxuries that you take for granted when working full time and in good health would suddenly either become a major burden, or simply be unjustifiable.
With income protection insurance, you would still be getting the majority of your salary month by month, and so you could avoid having to make any significant changes to your lifestyle as a result.
Another point to make is that in some regions, you won’t even have to pay tax on the money paid out by your income protection policy if you need to make a claim.
You could even be slightly better off because of this quirk, although this is not a universal tax rule and laws are liable to change, so keep an eye on this.
Household breadwinners should definitely consider getting income protection insurance, especially if they don’t already have some other form of insurance like this, such as critical illness cover, mortgage payment protection, or life insurance.
You can compare policies from different providers and get a good deal on income protection insurance, so it doesn’t need to be a major drain on your finances.