What is Income Protection Cover?Income protection cover is an insurance policy where policy holders are paid benefits when they are unable to continue working temporarily or permanently, owing to an accident or illness.Some time back my colleague, Mr Richardson was seriously wounded following a grenade attack when he was conducting a project research in Somalia. The damage to his legs and chest were so bad such that he was airlifted to the neighboring country, Kenya to receive further medical attention. Unfortunately, Mr Richardson lost both his legs and he had to be bed ridden for over three months and he had to attend regular medical check ups to ensure he did not contract infection to the amputated legs. This was very tough for his family given that he was the bread winner. Mrs Richardson had to take on a second job and sadly, they had to withdraw their children from private school because they could no longer afford it. All these financial setbacks could have been avoided if only Mr Richardson had considered investing in an income insurance cover.
There are different types of income protection policies Mr Richardson could have applied for includingIndemnity value cover- the policy is not only more common but also more affordable. It is affected by changes in your income
Agreed Value Cover- the policy is more costly. The benefits paid out reflect your income from the day you applied for the policy.Advantages of Income Protection CoverWhat makes this type of policy more beneficial than other insurance policies including personal accident and sickness insurance policy, accident insurance policy and sickness and unemployment insurance is thatAs a policy holder, you are paid the benefits when you are incapacitated and when the deferred period has expired. You continue to enjoy the benefits until your demise, retirement, recovery to full health or when the contract expires
You receive the policy benefits regularly, often weekly or monthly
The benefits are tax free
Policy providers cannot cancel the income protection cover as long as you are paying the premiums
You can obtain waiver of premium whereby, you will obtain benefits even when you are not paying the premiumsSo, What Factors Should You Consider When Applying For an Income Protection Cover?1. Establish The Policy’s Key FeaturesDifferent income insurance covers have varying features. Therefore, it is important to establish the specific features of the type of policy you are applying for. This includesThe percentage of the salary covered by the policy
Value of the cover in terms of fixed monthly benefits payable to you
Additional policy benefits designed for your needs2. The Cost of the PolicyDifferent income insurance policy providers offer their products at relatively competitive rates. Therefore, it is important that you apply for a policy that is affordable and worth your money. Some of the factors that determines the cost of an income protection cover includes:
Gender- the policy is more costly for women than men
Age- the older you are, the higher the cost of premiums
Type of occupation – high-risk occupations attract higher costs than low-risk ones
Deferred period- the longer the deferred period the cheaper the cost of the cover
Lifestyle- high risk lifestyle such as smoking and high risk recreations such as motor racing affect how much you pay for your coverApplying for this type of policy ensures that you have regular income when you are unable to work owing to illness or accident. With the uncertainty about what will happen next, you can safeguard yourself and those you love by investing in income protection cover that meet your needs.