Income protection cover
Whatever we might wish to otherwise be the case, the reality of modern life is that an income is necessary to survive.
It may be that you take for granted your income and what it provides you with, such as the ability to pay your mortgage, household bills, food, clothing and children’s expenses etc.
However, there are three things that might quickly and unpredictably remove your ability to earn income for yourself and your family’s needs:
- compulsory unemployment.
In any of the above circumstances, you may find yourself unable to work and therefore obtain income. Financial difficulties might follow very rapidly unless you have taken steps to protect yourself through an income protection insurance policy of a type offered by Drewberry Insurance and others.
The cover provided
There are a number of options available to protect your income and the basic principles of such policies are very straightforward.
There are short term options, such as income payment protection insurance that offer cover against forced redundancy, sickness and accident. These typically run for between 12-24 months of you being unable to work, or of you being unemployed.
Longer term income protection policies can run for a number of years – up until retirement age – and cover inability to earn an income due to accident or illness. Redundancy is not covered by this type of policy.
How do they work?
If you experience unemployment or the inability to continue working due to an insured risk, then presuming the conditions of the policy have been met, the provider will commence paying you a monthly income at a specified level. That would continue until you are able to return to work or reach the maximum pay out duration period as specified by the policy which with long term policies could be your normal retirement date.
Of course, this type of cover is meant to protect you against circumstances under which you could have had no reasonable degree of control. So, as you might imagine, it will not make payments in situations where you have been responsible for events including typically things such as resignations, criminal activities, career breaks and so on.
Is such cover necessary?
It is possible that your employer will have some form of accident and sickness scheme in place. If so, you may need to inspect it closely to understand both its benefits and limitations.
Typically though, full salary levels are only paid in the event of accidents and sickness up to a limited number of weeks. After that time, the percentage of salary paid may diminish rapidly until quickly reaching zero.
You may find that such protection would not be able to offer you a relatively normal financial life for more than a short period of time.
The standard government social help in such situations is also typically extremely limited. Many people may find it extremely difficult to survive based upon that help alone.
Could it happen to you?
Official figures for 2012 show a total of approximately 595,000 redundancies alone across the United Kingdom.
Of course, some of those so affected may have found alternative employment relatively quickly but these figures also clearly do not include those who were unable to work due to accident or sickness.
The bottom line is clear – losing your income or seeing it substantially reduced is not something that only happens to others nor is it rare.
That’s why it might make sense to find out more about the different variations of income protection insurance available sooner rather than later.