The older you get, the more insurance products you get marketed. But is income protection insurance worth it? If it’s not travel insurance, it’s mortgage insurance. If it’s not health insurance, it’s pet insurance. There’s literally insurance for everything.
Yes, some of them are absolutely necessary. Don’t go skipping out on car insurance, or home insurance. But do we need to insure everything?
One optional insurance product that we are encouraged to take out as our financial responsibilities begin to mount is life insurance. There are a few different products under the life insurance umbrella. One of these products is income protection insurance - and actually, this one is pretty important.
Do You Actually Need Income Protection For Your Family?
What is income protection insurance?
Income protection insurance does what it says on the tin - it protects your income. If you were to fall seriously ill or become seriously injured and had to take a long-term break from work, income protection would pay out and cover a portion of your income so that you could stay afloat.
Typically, 30-50% of your income can be covered under an income protection policy, but you choose the amount when you take out your cover. You can even opt for as much as 70% of your income to be covered, but this will cost more in monthly premiums.
If you were to make a successful claim, your policy would pay out regular tax-free cash (either monthly or annually, depending on what you’d prefer) and you can use this money however you wish; to pay bills, your mortgage or rent, or to cover everyday household spending.
Why is income protection so important?
You might be thinking that you are young, fit and healthy enough to not have to worry about being out of work long-term. But if the COVID-19 pandemic has taught us anything, it’s that our health is never guaranteed and anything can happen.
Plus, if you take out your income protection insurance policy earlier in life, your premiums will be lower as insurers will deem you as less of a risk.
Think about it - are you more likely to pass away before retirement, or become seriously ill or injured? Probably the latter. And each year, life expectancies are increasing.
Whilst this gives us more time to treasure with our loved ones, it also leaves us more at risk of developing health issues as we get older. Income protection truly is the protection that every working person should consider.
Is income protection expensive?
As with most insurance products, every income protection quote will be slightly different. This is because it is based on your personal circumstances. When you receive a quote for an income protection policy, the following factors will be taken into account:
- Current health and family history
- Marital status
- Whether you smoke or have previously smoked
- Whether you have any high-risk hobbies i.e. mountain climbing
- The amount of cover you choose
- The deferral period you choose
You should be able to find a quote that fits your budget - particularly if you work with an insurance broker who can help you search the market.
Remember - cheaper isn’t always better. This is your lifestyle and family that you are protecting. It pays to have peace of mind!
Your income is well worth protecting, so that you and your family can continue to maintain a happy, healthy lifestyle even when things feel like they’ve been turned upside down.