Should you take out income protection insurance?
Taking out income protection insurance is an extremely smart idea for suitable people as it will act as a safety blanket if anything should go wrong with your job and you are unexpectedly left not being able to work for a period of time.
What is income protection insurance?
Income protection insurance is put in place to replace some of your salary in the event that you have to take a considerable time off work due to an illness or accident. The payment protection insurance will pay out until you are well enough to return for work. If you never return to work due to your accident or illness, the protection should pay out until you reach retirement age.
How Does it work?
You will pay for your income protection insurance in monthly installments. How much will depend on the policy you have chosen. If you choose the right one, the insurance has the potential to pay out for many years. It is best to speak to a financial advisor to make sure you are getting the very best deal.
What are the pros?
This is especially something to look into if you are self-employed. If you work for yourself you won’t have sick pay to fall back on and for this reason could really use this money. If illness would mean that you couldn’t pay the bills then this would be an extremely useful thing to fall back on. The payments you receive will be based on your income and you can typically expect 50% – 70% of your earnings.
What are the cons?
There will be a wait before you start receiving your payments after you’ve stopped working. Ususally you will start to see payments after sick pay ends, the downside to this is that the longer you wait the lower your payments will be. You can get insurance which will pay out immediately, however the monthly premiums will be much higher.
Should I take it out?
According to research by Unum and Personnel Today, just 12% of employers support their staff for more than a year if they’re off sick from work. You wouldn’t necessarily need to think about IPI if government benefits would be enough for you to survive on or if you were near to retirement age as you could consider early retirement, otherwise Which? the comparrison site insists that every employed person should look into Income Protection Insurance.
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