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How To Buy Income Protection

Many people who have full time jobs usually do so in order to support themselves, and often their families. Without the money they earn, they could potentially end up in some serious financial dire straits!

The trouble is; life often presents all sorts of unknown variables in people’s lives. In other words, because we cannot predict the future, we will be unable to tell whether a certain event might cause us major disruption in our lives – especially from a financial point of view.

Although we can obviously take some steps to minimise any risk that could affect us during our daily working lives, we can’t completely eradicate all risks.

So in order to protect ourselves from being in a situation where we suddenly can’t work anymore, like say from an accident at work, for example, many of us in the UK take out a type of insurance policy called income protection insurance.

What does income protection insurance provide?

When you take out income protection insurance, it will typically pay out any benefits if the policyholder becomes incapacitated.

These benefits are usually a pre-agreed amount which would cover all or most of the policyholder’s monthly expenses, and these benefits will continue to be paid out until they either return to full health, retire, pass away, or the term of the policy is reached (whichever event occurs first).

Taking out an income protection insurance policy is a decision that is not to be taken lightly, and will require you being guided by financial experts so that you can have the peace of mind that you will be covered against the most likely events that could occur.

Here is what you need to do in order to take out an income protection insurance policy:

Talk to a broker or independent financial adviser

Your first port of call would be to speak with a specialist broker or a qualified independent financial adviser. Because there are so many different types of income protection policy on the market, you could easily buy the wrong sort of cover.

Therefore, it is imperative that you speak to a financial professional so that they can help you find the most suitable policy for your particular set of circumstances and requirements.

And if you have ever been declined insurance (for example, if you have a pre-existing medical condition), then they can even locate specialist insurers on your behalf that would be willing to provide you with the appropriate level of cover for your needs.

How your insurance premiums are calculated

The way that your income protection insurance premiums are calculated can usually be attributed to the same sorts of factors that most insurance policies are calculated on, such as:

  • Pre-existing medical conditions;

  • Deferment period – how long you have to wait before you can start receiving the cash benefits of your policy;

  • Term – how long you want the policy to run for in the event of a claim (some people opt for a set number of years, others choose to get paid until they retire);

  • Age and occupation.

As you can see, it can be quite a complicated affair so you should definitely seek the help and advice of a broker or independent financial advisor first.

Image via Flickr

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