Income Protection
What Is The Income Protection?
Income Protection is designed to pay a regular income to someone who is unable to work for an extended period. This may be due to an illness, an injury, or sometimes through involuntary redundancy.
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Usually, you can take out a policy that covers between 50-70% of your pre-tax monthly income for a predetermined length of time, although this can differ. You’ll make a payment each month to keep the cover in place and if you are unable to work during the policy, after a minimum period, you’ll receive the insured amount each month until you’re able to work again or the cover runs out.
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The insurance benefit (the amount you receive each month) is 100% tax free, meaning you have the money you need to pay your most important bills.
How much does Income Protection cost?
Income protection premiums are affected by many factors. The insurer calculates the likelihood of a payout using these factors. The main ones are:
Age
Smoking and Drinking
Medical history
Lifestyle
Amount to be paid out annually
Duration of the policy
Why is Income Protection important?
Income Protection is incredibly important if you have a family or dependents, debts or loans to repay, or your sick pay isn’t enough to cover you bills if something were to happen to you. Many of us don’t have huge savings accounts which would mean we could not work for months or even years, but sadly every year thousands of people become too sick to work or lose their jobs.
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Income protection provides a guaranteed level of earnings, meaning that if something were to happen and you could no longer work, you could cover your bills. That could be your mortgage, loan repayments, car payments or the weekly shop for your family.
Income Protection and Life Insurance. What is the difference?
Income Protection provides a regular tax-free income if a policyholder can’t work, whereas term life insurance provides a lump sum upon the policy holders death. Both products are incredibly important as they can provide financial support to your loved ones and family if something were to happen to you.