What is an Income Protector? And Top 7 Reasons to Have One

Income is the lifeblood of our financial well-being. It provides us with the means to pay for our daily expenses, save for our future goals, and provide for our loved ones. But what happens when our income is suddenly disrupted due to unforeseen circumstances such as illness, injury, or redundancy? This is where income protection comes in. Let’s discuss what an income protector is, why you should have one, and what you need to think about when buying it.

What is Income Protection?

Income protection is a type of insurance that provides a regular income if you are unable to work due to illness, injury, or redundancy. It is designed to cover a portion of your lost income and can be used to cover your daily expenses, such as mortgage or rent, utility bills, groceries, and other living expenses. The benefit amount is usually a percentage of your income, typically up to 75%, and is paid out tax-free.

7 Reasons to Have Income Protection

To Ensures Your Income Continues Even if You Can’t Work

One of the primary benefits of income protection is that it provides a safety net for your income. If you are unable to work due to illness, injury, or redundancy, income protection will provide you with a regular income. This means that you can continue to pay for your daily expenses and maintain your standard of living. Without income protection, you may be forced to rely on your savings or borrow money, which can have long-term financial consequences.

It Can be Easily customized

Income protection policies offer a range of benefit options that can be tailored to your specific needs and budget. You can choose the benefit amount, waiting period, and benefit period that best suits your circumstances. For example, you may opt for a longer waiting period to reduce your premiums or a longer benefit period to ensure you have sufficient income for a prolonged absence from work.

You May Be Able to Use Income Protection Insurance to Care for a Sick Child

Some income protection policies offer additional benefits, such as carer’s benefits. This means that you may be able to receive a regular income if you need to care for a sick child or dependent. This can provide financial support during a difficult time and help you balance your caring responsibilities with your financial obligations.

Your Income Protection Premium May Be Tax-Deductible

In some cases, income protection premiums may be tax-deductible. This means you can claim a deduction for the cost of your premiums in your tax return. This can help reduce your overall tax liability and make income protection more affordable.

You May Be Covered for Redundancy

Many income protection policies include redundancy cover as an optional extra. This means that if you lose your job due to redundancy, you may be able to receive a regular income for a specified period. This can help ease the financial burden during a difficult time and give you peace of mind as you search for a new job.

Making a Claim is Straightforward

If you need to make a claim on your income protection policy, the process is usually straightforward. You will need to provide evidence of your illness, injury, or redundancy, but the insurer will guide you through the process. In many cases, you can claim online or over the phone, which can help streamline the process.

Affordable Premiums

Income protection premiums are affordable, especially compared to other insurance types. The cost of income protection depends on various factors, such as age, health, occupation, and benefit options. However, the peace of mind it provides is priceless.

It Helps Your Life Get Back to Normal Quicker

Finally, income protection can help your life get back to normal quickly after an unexpected event. By providing a regular income, you can focus on your recovery or finding a new job without worrying about how you will pay for your daily expenses. This can help reduce stress and improve your overall well-being.

Five Things to Think About When Buying Income Protection Insurance

Here are the top things to keep in mind when buying an income protector:

Be Honest About Your Medical History

When applying for income protection insurance, being honest about your medical history is crucial. Failure to disclose any medical conditions or previous illnesses may result in your claim being rejected. The insurer may also investigate your medical history, and if they find out that you provided false information, your policy may be canceled, and you may not receive any benefits.

Choose a Suitable Level of Cover

The level of coverage you choose should reflect your income and expenses. You need to calculate how much income you would need to cover your daily expenses if you were unable to work. It’s also essential to consider the waiting period and benefit period, as these will affect the amount of income you receive.

Read the Small Print

It’s essential to read the small print and understand the terms and conditions of your income protection policy. This will help you understand what is covered and what is not, the waiting period, the benefit period, and any exclusions. Ask your insurer or seek professional advice if you’re unsure about anything.

You Can Change Your Mind

If you’re unhappy with your income protection policy or your circumstances, change, you can cancel or amend your policy. It’s essential to check the terms and conditions of your policy to see if there are any penalties for canceling or amending your policy.

Keep Your Cover Up-To-Date

It’s essential to keep your income protection policy up-to-date. This means that you need to inform your insurer if your circumstances change, such as if you change jobs, your income increases, or you have a change in your health status. Failing to inform your insurer of any changes may result in your claim being rejected.

Wrapping Up

An income protector is an essential type of insurance that provides a safety net in case of unexpected events such as illness, injury, or redundancy. It is designed to cover a portion of your lost income and can be used to cover your daily expenses. If you haven’t already, it’s time to consider income protection as part of your financial planning.