It isn't surprising that some people worry when considering buying income protection. Media coverage about customers being sold PPI improperly hasn't helped; consequently four out of five people in the UK do not have Payment Protection Insurance. Many consumers are wary when it comes to paying out for a monthly premium; however this could be one of the most important decisions you make.
What is Income Protection?
Income Protection, also known as Accident, Sickness and Unemployment (ASU) cover Payment - is a policy that pays you tax-free monthly payments if you lose your income due to redundancy, accident or sickness. This policy is also known as Protection Insurance - (often referred to simply as PPI)
There are state benefits to help you, but the new government have announced changes to how they assess customers. You would have to undertake a work capability assessment to decide whether you receive the benefit. Over 1 million claims are turned down each for incapacity benefit - this is likely to increase when the new measures for assessment are introduced in 2011.
More and more people are turning to Income Protection Insurance so, if the unexpected happens - a car accident or sudden illness, for example - you can be assured that Payment Protection Insurance will cover not only your mortgage repayments, but even council tax and utility bills.
How you pay
Your monthly premiums (what you pay for the policy) will depend on several factors.
o Firstly, you need to choose your 'waiting period'. This is the length of time you've chosen to wait until your money is paid out). For lower monthly premiums you will need to choose a longer waiting period.
o As you get older, the likelihood of getting an illness increases. Therefore you will find that you pay larger monthly premiums the older you are.
o Women will usually pay more than men as there is more chance of a woman falling ill.
o If you suffer from poor health, then your Income Protection Insurance will be greater too as there is a much higher chance of you falling ill in the future.
o If you have a dangerous job, then you will usually pay more for your insurance too. This will also apply if you have dangerous or extreme hobbies or pastimes.
So how do you choose the right Income Protection Plan for you? It is important that you find the right plan that suits your needs. It is worth searching the internet to find any specialist income protection providers that understand your profession - they will be able to point you to the plans who will offer the best cover for the best price. There are some companies that specialise in certain occupations - for example, nurses, doctor and teachers.
Others cater specifically for those with manual labour jobs. However, if you are self-employed or a contract worker, you need to check the policy for exclusions. Also, you will be unlikely to claim for unemployment insurance straight away - typically you will need to wait for around 120 days, depending on the policy.