Did you know that 40 percent of Americans live paycheck-to-paycheck? If their income suddenly stopped, most families and individuals would have difficulty paying their regular bills.
There are ways to prevent your income from being lost. In the event of your unforeseen loss of job, income protection insurance policies can help you.
Continue reading to learn more about income protection insurance and why it is important that you take out a policy.
What is Income Protection Insurance?
There are many types of disability insurance available. Income protection insurance is a special product that pays tax-free income to you if you become disabled or sick. It is designed to help you get back to work.
You would be eligible for payments if you have stress-related injuries or a serious illness like cancer. Most payments are made monthly and continue until you die, retire or return to work.
You may also be eligible for “stepped” benefits if you have employer-provided coverage. Stepped coverage will offer a lower payment while your employer pays, and then will go up once they stop.
Inflation will also be a factor in the payouts of other policies. To keep pace with rising prices, their payouts will rise by a small percentage each calendar year. Their premiums will also increase with time.
What are the benefits of Income Protection Insurance?
Because you won’t be able to access employer benefits, income protection insurance is the best option for self-employed workers. This policy is also recommended for anyone with low savings, recurring bills, and dependents.
An individual income protection insurance policy will pay above what the government does for disability. This will help you to maintain your standard of life.
How to Get Income Protection Insurance
When comparing income protection policies, there are two things you should remember. First, these policies won’t cover your income from the past.
They will only cover a certain percentage of your income. These policies are tax-free, so your take-home income can be comparable.
Remember that these policies don’t pay you until you cease working. Most policies have a time limit during which they won’t pay you. This can be anywhere from a few weeks up to one year.
You can lower your monthly premiums by choosing a longer deferral term for this type of insurance policy.
Protect Your Financial Health
An income protection policy can protect you from financial shocks. You cannot control changes in your employment. These policies will give you the assurance that your life and dependents won’t be affected if you are unable to work.
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