Income protection should be part of ensuring one's financial security. Having a regular source of income isn't enough, since your salary pay might be significantly reduced in the event of an acute illness or physical trauma. Having insufficient funds can have dire consequences. Where will you get money to buy food? How will the family come up with enough money to pay the monthly bills? These types of questions will surely aggravate the uncertainty of your socioeconomic situation. To prevent being short of funds in times of need, it's a wise choice to avail of an income protection policy.
How does income protection insurance work? Simply put, in exchange for premium, income protection insurance disburses money at regular intervals when you get sick or are injured; until such time that you are again fit to work. The length of time covered can vary from one year to until the beneficiary reaches sixty-five years old.
There are different types of income protection insurance. There are those that pay out in proportion to the fluctuations in income (called agreed value insurance), and there are policies that have constant payment benefits regardless of income changes (indemnity value policies). Choosing which one to get all depends on individual situations. Typically, income protection insurance covers up to seventy percent of the total monthly income, which are just enough to pay for the monthly expenses.
The premium to be paid depends on several factors. Age, gender, and occupation can have an influence on the payment. Pre-existing health conditions as well as habits that can affect one's health, such as cigarette alcohol use, are also contributing factors. The length of the deferred period, aka the time between claiming the policy and the time when its payment benefits can be reaped, is also taken into consideration. A general principle is that the longer the waiting period, the lower the premium.
