Income Protection Insurance Fills in the Gap

2007-07-24 08:31:47

( Insurance )



Uncertainties of Life

Nothing is certain in life. You could lose your job or get disabled by an accident or illness. In such cases, your regular source of income from your job or business gets cut. Although you may be able to claim state disability payments, these are only a fraction of what you must earn in order to cover your monthly expenses. How will you manage by then?

Features of Income Protection Insurance

Today's insurers have recognized the need for you to continue supporting your household even though you are unemployed or disabled. Several insurers have developed a specific type of insurance protection against such circumstances.

Income protection insurance policies provide temporary replacement income for you during your unemployment, illness or disability. Like term life insurance protection, this policy has a short-term coverage period usually up to one year.

Like state disability benefits, your income protection insurance provides you with fraction of your normal monthly income amount, usually about seventy percent. Some insurers also impose an amount ceiling for monthly income protection proceeds.

The number of months you will be compensated by your income protection policy depends on the arrangement you have with the insurer, but the usual maximum period is twelve months per insurance claim. The amount paid is tax-free, and you have freedom in choosing how to spend the proceeds.

Another variation of this type of policy is payment protection insurance, which covers only your monthly mortgage payments.

Determining Your Income Protection Coverage

Your amount of coverage will depend on your current monthly income or salary level. You also need to consider your total amount of savings and how long you can survive without a steady flow of income. You need to know what benefits your company can give you for disability. You also need to estimate how long you might be able to get a job in case you lose your current one.

There are numerous insurance companies offering income protection insurance, so be sure to shop around first for the best deals. Your premium payment amount will depend on the amount and period of coverage, so you need to discuss it thoroughly with your insurance agent.


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