I’m the first person to admit that I get confused when it comes to buying income protection insurance. I’m always worried about buying insurance I don’t need, or ending up with to much cover and over paying.
Given my age and that I’m self employed I started to wonder what would happen if I was too sick or seriously injured to work. With out a regular income it would be very difficult to cover the bills and pay the mortgage. In a effort to be more grown up I started to look into what income protection is. I found this so helpful I thought I’d share what I’d discovered. If you often feel a bit bamboozled about income protection insurance and similar policies available this post will help you understand what it is all about.
Why Consider Income Protection Insurance?
Did you know that 1 million people every year find themselves unable to work because they are too sick or seriously injured? That’s a lot or people out of the working population if you think about it.
Income protection insurance is a policy which gives you cover if you find you are unable to work for any of these reasons. Income protection insurance usually provides you with around 50% – 70% of you income until either you are well enough to return to work, you retire or you pass away.
I found it really helpful to consider these questions before deciding if income protection was right for me.
- Will I receive any employee benefits if I’m sick or injured and how long will they last?
- Would I be entitled to Government benefits and would they cover my outgoings?
- Do I have enough savings to cover my bills if I was sick or injured for a long period of time?
- Is early retirement an option if I became sick or injured?
- Would I receive financial support from my family?
For me the biggest issue is that being self employed I do not receive any employee benefits, so considering where my income would come from if I was unable to work is a big question to consider. Bearing in mind that things like government benefits change it’s important to consider every possible scenario.
How Much Does Income Protection Cost?
Unfortunately there isn’t an easy answer to this question as there are lots of factors to consider. How much you pay for income protection insurance depends on your age, your medical history, the level of cover you require and the deferral period.
If you want to keep the cost of your income protection down, you can ask for a longer deferral period. This is the period between when you become too sick or injured to work and you receive your first payment.
When you are thinking about how long your deferral period should be it’s an idea to go back to the questions I asked earlier in this post. If you have some savings or think you might receive support from family for a period you may consider a longer deferral. If you would worry about covering your bills even in the short term then maybe a short deferral period is a better option.
When you are considering any type of income protection it’s always important to do your research to consider if the policy is necessary and compare your options.