What does income protection cover?

In these weird, crazy and uncertain times, I think it’s fair to say that quite a few of us have started thinking a little more carefully and seriously about insurance – specifically life insurance. And when it comes to life insurance, it’s not just the products that protect our family when we pass away that are important.

Income protection insurance is designed to pay out whilst you are still around to see the money go to good use. Think about it – you’re more likely to get seriously ill and injured before retirement than you are to pass away. That’s why this is such an important insurance product to have under your belt.

Ok, but what actually is it?

When you claim on an income protection insurance policy, you have to wait for your chosen deferral period to pass. This is a period of time that you decide on when taking out your policy, between making a claim and your payouts starting. This can be as little as six weeks, or as long as nine months. 

When your payouts begin, you receive regular portions of your usual salary (usually between 50-70%). You may receive your payouts monthly, or annually – again, you decide. Your payouts will continue to support you until you either go back to work, reach retirement or pass away during the claim period – whichever comes sooner.

What does it cover?

So, what can you actually make a claim for on an income protection policy? It covers you for most illnesses or injuries that leave you unable to work. This could be a stress-related illness, serious heart condition or muscular back pain. The list goes on. The focus with this product is on not being able to work, as opposed to the illness or injury that you have sustained, which is the main difference between income protection and critical illness cover. 

There are a few things that you will not be covered for with income protection. It doesn’t cover any pre-existing medical conditions that you had and knew about before taking out for your cover. Pregnancy is also excluded, however pregnancy-related complications might be covered. Basically, if anything is self-inflicted and not a totally unforeseen accident, then you probably can’t claim for it. Think alcohol and drug misuse, criminal acts, cosmetic surgery or war-related issues.

It won’t cover you if you get fired or get made redundant. In fact, since the COVID-19 pandemic it’s become really tricky to find any insurance policy that will cover redundancy and unemployment. Income protection only pays out if you become too ill or injured to go to work.

If you are a parent, these sorts of insurance products are even more important. You have little lives who rely on you and ultimately, your income. Make sure that if something unexpected happens to you, you have the right cover in place to ensure that your family’s world doesn’t get turned upside down.

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