Income protection insurance is for people who work and want to protect their income in the event of illness, injury, or unemployment. Income protection can help provide an income if you are unable to work due to sickness, injury, or unemployment. Not everyone needs it, but most people are surprised at how much they need it!
The following post discusses five important things to know about income protection insurance, with the hope of providing you with some insight into this type of coverage.
What is income protection insurance?
Income protection insurance protects the money you bring in from work. When you work, your income includes the wages you earn and the value of any government benefit payments you receive.
Income protection helps provide you with an income if you become ill, injured, or unemployed and can’t work. The basic policy covers you while you’re at work, but you may choose to add additional benefits and protections in addition to that, such as vacation pay, sick pay, disability pay, and others.
While most people use it to replace a job income, people find income protection insurance to guard against sudden unexpected financial pitfalls. For example, someone in Australia with a job in a hospital might need protection against becoming ill, injured, or unemployed.
How does income protection insurance work?
Income protection insurance protects you in three different ways. First, it protects the money you bring in from work by making sure you have the money you need to live. Second, it helps you maintain your standard of living in the event of an injury or illness that prevents you from working. Third, it helps you financially recover if you get ill or injured while unemployed.
Income protection insurance covers work income (wage and non-wage benefits) and wages paid by a government benefit agency. The difference between the two is that the non-wage benefits provide income support for you while you’re not working.
The other benefits provide a level of income security that your financial provider would not be able to provide for you, at least not in the same way that the benefits do for people who work for a living.
For example, for people who are entitled to more than 100% of the federal poverty level, the benefits pay a monthly stipend in addition to the basic income support they receive from social welfare programs.
Who needs income protection insurance?
Even if you don’t get sick or injured while you’re at work, you’ll find the benefits of insurance to be worth it. For example, you may need to take a leave of absence from work. Some people are more likely to be able to rely on income protection insurance than others.
For example, people who have health issues that make it difficult for them to work, even if they can manage to do some work. This may be due to age, family situation, or injury. If you fall into this category, income protection insurance may be beneficial.
In addition, if you are in debt, have a gambling addiction, or have recently gone through a divorce or marriage breakdown, the stress can put you in a vulnerable position, where you may need income protection insurance to help you deal with the situation.
Who Is Eligible for Income Protection Insurance?
Here are some factors that determine whether you are eligible for income protection insurance.
• Your work status. Work status determines what types of income protection coverage you are eligible for. The most common work status is part-time or full-time (however you measure it).
• Your age. You may be eligible for income protection insurance as early as age 18, but the more years you have been working, the more protected you are.
• How much income you bring in. Your family size determines how much income protection insurance you can receive, as well as the length of time it will last.
What Types of Policies Are Available?
There are three main types of income protection insurance available:
• Lump-sum payments
• Payment for disability
• Payments for unemployment or other special circumstances
Lump-sum payments and disability insurance are paid for with an insurance policy, such as an annuity. They are typically more expensive than income protection insurance that covers only income.
Lump-sum payments pay you a guaranteed amount every month, depending on your personal and family history. You get your lump-sum payments in advance, even if you lose your job or become unemployed. If you don’t receive your payments, it means that you have to go through the claims process to try and recoup your loss.
If your monthly income is under the amount covered by the insurance, then you are able to avoid this process by having income protection insurance.
Income protection insurance can provide some financial security in the event of an illness, injury, or even loss of a job. With the right kind of income protection insurance, you can be sure that you will always have enough money to keep a roof over your head and provide for the basic needs.
While income protection insurance is expensive, it is something that can help protect you and your family from the impact of life’s unfortunate circumstances.