Income protection insurance, a key aspect of financial planning, is often brushed aside. People tend to focus on immediate needs and short-term financial targets, sometimes causing this vital insurance to be overlooked.
Despite its substantial benefits, a lot of individuals neglect to fully appreciate its value, often until it’s too late.
What is income protection?
Income protection is an insurance type that comes to your aid if a severe illness or injury prevents you from working. It differs from critical illness cover, which gives you a single large payment if you suffer from a specific serious illness. Instead, income protection offers regular monthly payments. These payments usually cover a certain percentage of your regular income until you’re able to get back to work or until the policy concludes.
Why does income protection matter?
It may seem evident why one should have income protection, but a deeper look reveals why it might be an excellent choice for you and your family:
Preserving your lifestyle: Your earnings are what sustains your way of life. If an unforeseen incident like an illness or accident stops you from working, income protection insurance can offer you a consistent income. This enables you to manage your everyday living expenses, maintain your present lifestyle, and safeguard your financial stability without dipping into your savings.
Meeting debts and obligations: The steady income from the policy helps you to keep up with your financial commitments, such as mortgage payments, utility bills, and credit card debt. This can bring considerable relief during a tough time, ensuring your obligations don’t add to your troubles.
Recovery without financial worry: Health problems are stressful enough without the added financial concerns. Income protection allows you to concentrate on recovery, without the worry of meeting your financial obligations. Income protection can lower stress levels, contribute to a healthier mindset, and in some cases, it may even speed up recovery. But if nothing else, it provides peace of mind.
Flexible and adaptable: Income protection policies are flexible and can be customised to fit your needs. You can typically select the deferred period (the wait before the policy pays out), the proportion of income you wish to cover, and the policy duration. This flexibility allows you to adjust your coverage based on your financial situation.
A safety net for the self-employed: For self-employed folks or small business owners, income protection can be a financial lifeline. Without an employer to offer sick pay or a benefits package, this kind of policy can be a game-changer, offering much-needed security.
Income protection is often neglected due to misunderstandings about cost, necessity, and the belief that ‘it won’t happen to me’. However, illness and injuries can strike at any time and can affect your earning potential long-term.
Before buying any policy, it’s crucial to talk with a financial adviser at Macalvins to understand the full range of options available and to ensure the policy matches your specific needs and circumstances.
To learn how we can help you find the appropriate level of income protection, please reach out to us.