Insure Yourself Against The Possible Income Loss

We very often than not come across two words “ensure” and “insure”. Consult any good dictionary you will get to know that both the words connote the same meaning. For example The WordWeb dictionary says “ensure” connotes be careful or certain to do something or make certain of something while “insure” too implies the same meaning. Then what is the difference between ensure and insure? Virtually nothing if you are serious about your life. But, to ensure your security against the possible income loss you must have to go the Income Protection Insurance way. There can’t be any second thought on that.

What can you expect from Income Protection Insurance?

We have no limitation on our expectations. People with high ambition opine that you should rather be not constrained by your expectations. Because, as per the said school of thoughts once you limit your expectation you are basically limiting your potential. To me this can at best be termed as a partial truth in view of the fact that always in need of more can virtually put you in disastrous situation leading to utter imbalance between the professional and personal life. There is no denying the fact that we work for our families as well.

People who deny that never satisfying attitude puts them in trouble basically lie to themselves out of desperation for more money, name and fame etc. We however do not have any argument with them who desire to live in their falsity.

In reality time has changed, so have been the priorities of life vis-à-vis the unforeseen challenges it throws open at every nook and corner. As a common man one can’t really afford to compromise with the security with regard to income. There comes Income Protection Insurance into play.

Income Protection Insurance is an insurance policy that compensates us at the time of our distress such as job loss on account of illness or accident. It would however be wise to caution you here that before you jump into buying spree read the offer document carefully to check its suitability vis-à-vis your needs.

Factors Affecting the Cost of Income Protection Insurance

The insurance which protects your income is called income protection insurance. As with the changing environment, the risk of getting sick is increasing. Therefore, it’s always better to prepare in advance for any mishap which might take you to suffer with severe financial problems.

Income protection insurance not only protects you against sickness but also protects against accident which might make you handicapped for life time. These insurance policies prove to be boon in this situation, since the insurance is long-term in nature.  You can take the benefits of these insurance policies till your retirement if you do not get able to return to work, means till the age of 65 years.

Before buying income protection insurance in Australia, it is always necessary to calculate the cost of the thing to ensure that is it coming under your budget or not. One should also make an idea that will it be worth buying or not. Same thing implies on the cost of income protection insurance policy which you are intending to buy.

You must make an idea that how much it’s going to cost you and also how can you lower the price of your insurance policy. To do this you must know about the factors affecting the cost of the policy. Here are some factors which affect the cost of policy and you can easily calculate that how much your income protection insurance plan is going to cost you.

How does your occupation affect the cost?

Your occupation has direct relation with the cost. If your occupation is related with manual work, the cost of insurance will be high. It is because, if the person have to work with heavy instruments and hazardous objects, he or she is likely to get ill soon. On the other hand people who do not have to do much manual work like clerk or manager can take the benefit of cheaper income protection insurance.

How does annual income affect the cost?

It is very clear to estimate that more the annual income, costlier the income protection insurance will be which can be taken by the consumer. However, the cost of product depends on the policy chosen by the consumer.

How does deferred period affect the cost?

Deferred period is the period between you stop earning because of your sickness or accident and the day you start getting money through insurance company. Longer the deferred period, lower will be the cost of the income protection insurance and vice versa. Therefore, you should also calculate your savings to estimate that for how long your savings can bear your expenditures.

How does age affect the cost?

More the age of the consumer, costlier will be the income protection insurance for him. It is because as the people grow old the risk of getting sick increases. Therefore, young people can take the benefit here.

How does sex affect the cost?

When it comes to income protection insurance policies females are subjected to get costlier insurance policy than males. All these cost affecting factors will help you to calculate income protection insurance cost easily.

Summary : You must know about the factors affecting the cost of the policy. Here are some factors which affect the cost of policy and you can easily calculate that how much your income protection insurance plan is going to cost you.

Income Protection Problems to Avoid

It is important to choose the best package for yourself. It is always best to go for an insurance policy that covers you against your ‘own occupation’. In this case, you start receiving benefits as soon as you are incapacitated to work in your former place of occupation. The other plan is that where you have the option of taking up a ‘suited occupation’ and only if you are unable to perform a suited occupation will you be paid benefits. By suited occupation, we are talking about an occupation that suits your degrees of education and training. In the third insurance plan, you shall be paid benefits only if you are unable to perform any occupation. This insurance policy is not very common.

The fourth policy is that where you are paid benefits in case you are unable to perform your daily chores. In other words, you are helped in case you are unable to perform your activities of dialing living (ADL). These include cooking, washing, housekeeping, etc. Very few insurance companies provide such insurance policies today. It is not easy to receive claims for this insurance policy because you are paid benefits only if you are incapacitated to perform your daily activities, which is highly uncommon. More often than not, it is seen that claims are rejected. Thus, it is better to not fall prey to this disguised from of income protection that might not materialize in your time of need.

As has been discussed earlier, the insurance policies have been divided into four divisions depending on the nature of the occupation of the policyholder. You could easily find yourself an insurance policy if you were a part of any of the first three tiers, it is not easy to be insured against the fourth and most risk prone section. Owing to the numerous risks that might befall such policyholders, insurance companies generally refrain from insuring construction workers, etc.  If at all you are insured, you shall be offered ADL based cover. In most cases however, you shall be declined altogether.

Although the income protection insurance is very reliable, it is important to note that there are some cases where you might not be able to successfully claim for benefits. In case you are having neck pain or backache, it is not going to be easy for you to receive benefits. Although there are a few companies that go by the doctor’s examination, most of the insurance companies examine the illness or injury physically. Many insurance companies are very stringent and do not pay you benefits easily. Some require proper reports from the orthopedic consultant (as in for backache) or the psychiatric consultant (as in the case of stress). Therefore, public liability insurance Australia more often than not becomes really difficult for the policyholder to prove his illness to the insurance company and as such, he/she is unable to receive any claims. Thus, it is always recommended to examine all the conditions of the insurance plan and only then go ahead with it.

Income Protection and Its Attributes

Income protection insurance is an insurance policy that secures your monthly income in case you become incapacitated due to illness or injury. These policies continue till the earliest of death, retirement or healthy recovery. The tradition of insuring your income is prevalent in United States of America, Britain, Australia, and New Zealand among other countries. Compare income protection plans secures your future in a way and allows you to lead your life the same way even any misfortune (arising due to illness or injury) does befall you.

The Income Protection Insurance insures the policyholder against his monthly income and pays him/her monthly benefits in case he becomes incapacitated due to illness or injury. The term ‘incapacitated’ can be used in four cases where the policyholder is unable to work due to different reasons.

If the policyholder has to discontinue his own occupation due to illness or injury, he is said to be incapacitated to work. If the policyholder is unable to find a suitable work (that is in accordance with his education and training) he is said to be incapacitated. The policyholder might also fall into this category if he/she is unable to perform any sort of job or even if he/she is unable to perform the activities of daily life (cooking, cleaning, etc.). Only in the above four cases is the policyholder entitled to receive monthly (or even weekly) benefits from the insurance company.

The insurance policy covers only up to 70 percent of your monthly earnings and pays you benefits accordingly. The duration between the date of illness (or injury) and the commencement of the payment of benefits is known as the deferred period. Premiums are higher if the deferred period is less and vice versa. The deferred period may extend from a gap of 18 days to a maximum of around 2 years. In order to provide an incentive to the policyholder, the insurance company offer reduced benefits if he/she takes up some other part time job after recovery.

The Income Protection Insurance has its own set of advantages and disadvantages, with the former exceeding the latter. The Income Protection insurance is full exempt from income tax and continues till the age of retirement (if the policyholder does not recover or expire in between). The benefits are paid on a regular basis and the terms and conditions of this insurance policy cannot be altered as long as the premiums are being paid on time. The only minute drawbacks that this policy does have are the conditions that determine the state of incapacitation of the policyholder. At an ethical level, this policy encourages the policyholder to recover from his ailing state by paying him proportionate benefits.

The Income Protection Insurance acts like a lifebuoy during your voyage named ‘life’. If at all your ship does sink and faces the rough tides, this lifebuoy makes sure you stay afloat and with some effort of your own, you are able to reach the shore. In a world where money is all that matters for your survival, we should make sure our present is better than our past and our future as good as our present, if not better.