We all grow up thinking that as soon as we finish our studies, we will get a job. The job will make it possible to buy a home and pay for the mortgage in the years to come. However, life is not always a bed of roses. Often will it happen that people who have the responsibility of a family on their shoulder worry about a situation in which they could not do any work due to an illness or some other predicament. They keep on thinking whether their family would be able to survive without them working. For many, if this hypothetical situation becomes a reality, it turns their life into a true nightmare and they find themselves completely helpless.
So, is there anything one can do, should this happen?
One possible solution for this kind of situation is to take an income protection insurance plan. With income protection insurance you can make sure that you will get a minimum amount every month as long as you are not able to work or until the contract period of your insurance ends. This amount can be something from 65% to 75% of your current salary and you will get it as per contract of your insurance plan.
The best thing about income protection insurance plan is that it covers you in those situations which your worker’s compensation policy from your employer will not cover. For example, if you get disabled due to an accident on road or any illness that is not related to your work, your worker’s compensation policy will not cover it. However, if you choose the right income protection insurance plan, it will cover you and it will give you a stable and regular monthly income till you recuperate and are able to work again.
Another benefit of your income protection insurance plan is that you can choose your benefit period, while this is not possible in worker’s compensation policy. With the right income protection insurance plan, you can extend your benefit period until you reach the age of 70. In case you are permanently disabled, you will keep getting up to 75% amount of your salary until you are 70 year old, and this is somethingyou do not get from any other insurance plan. In case you are self-employed, it will work as a great safeguard for you, since you will not have a worker’s compensation policy.
If we talk about Income Protection Insurance pros and cons, it is necessary to mention the following:
A few major benefits of income protection insurance include:
1) regular monthly income up to your recovery or contract period
2) it will cover almost any medical condition that can prevent you from working ( pre-existing diseases are excluded)
3) great safeguard for self-employed person
4) Income is tax free
Some possible downsides would be:
1) the benefit amount is always fixed with portion of your current income; inflation doesn’t make any increment in it
2) definition of disability may bind the coverage
Taking the possible downsides into consideration, you never know what the future holds. In case it ever happens that you are unable to work due to bad health and you are to pay off the mortgage, it will not be long that after a few EMI bounces, your home might be seized with a court notice. Therefore, if you are taking home loan, think again and seriously consider the plan for income protection insurance also.
Tim Phillips enjoys spending time reading about financial news and various types of insurance. He also likes sharing his knowledge, so people can be informed of the ways they can make their life easier.