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.
Income Protection 