Income Protection Plans: When you are temporarily out of work

2007-03-08 10:33:40

( Financial )



TIDING YOU OVER THE DIFFICULT TIMES

Income protection plans are insurance policies that cover you in case a situation arises wherein you are unable to go to work and receive a regular salary. Such situations may be of medical in nature, such as an illness or injury, or retrenchment. Either way, these unemployment situations can be a very difficult phase to go through, especially if you have a family to support.

Usually, income protection plans are designed to tide you over until you are able to go back to work after an illness or find a new job after being retrenched.

NOT AN INDEFINITE PLAN

If you have an income protection policy, the plan will pay or provide you with a monthly income or pension. Under income protection plans, the pension is usually given for a period of six to twelve months, depending on the features of the income protection policy you have purchased. Some income protection plans offer longer terms, depending on the company providing them, but there are no provisions for indefinite pension arrangements.

Usually, the amount you will receive is roughly half of your regular monthly salary. You may be able to receive more if you are willing to pay for higher insurance premiums. However, the standard payments for income protection plans are usually less than a third, but more than half of your monthly salary. The money you receive from an income protection policy is not subject to tax or to any other deductions, so the amount is all your own.

Because of the many insurance plans out there, make sure that you know all your benefits before you make any purchases. You may be having way too many policies for the same situation. Analyze your situation and think carefully before making any commitment. You may just be better off saving the premiums in the bank.


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