Income Protection Coverage – What It Is and Isn’t

by CherrellT on September 20, 2011

A person’s job and career is usually extremely important when it comes to being able to provide for a family and maintain financial stability. An individual can do everything in his power to ensure that he is always reliable and at work no matter what situation may arise. Unfortunately, there are sure to be times when unforeseen injuries or illness can negatively affect one’s ability to remain in the work force. In these instances, income protection insurance is essential in helping a person through difficult times.

Defining Income Protection

Income protection insurance essentially provides a qualified individual with a source of income, when it has been deemed that work is basically impossible due to the situation. There are a number of different variables when it comes to getting income protection insurance. Shopping around and reviewing all of the particulars will ensure that you get the coverage right for your particular situation.

Types of Coverage

Income protection insurance varies when it comes to the amount of one’s salary that is paid, generally anywhere from 50% to 75% of the gross income. Depending on the specific policy, there will be short-term and long-term coverage that is available. Short-term is considered to be anywhere up to two years, while long term insurance can last up to 10 years in some instances.

Variances of Incapacity

When it comes to purchasing income protection insurance, knowing all of the particulars will allow you to make certain you are adequately covered if the need arises. One of the main areas to investigate is the insurance company’s terminology when it comes to defining what is meant when a person is unable to work; this can easily differ from company to company and policy to policy. Knowing the specifics will ensure that you will be adequately covered.

Items Not Generally Covered

Income protection insurance will usually cover a wide variety of things when it comes to inability to perform normal work duties. However, there are several items that will not be covered by most insurance providers. You should be aware of the specifics so that there is no chance for confusion or misinterpretation of the policy:

– Medical conditions that are preexisting

– Drug and alcohol abuse

– Injuries that are self-inflicted

– Compensation in addition to employer payments

– Pregnancy

Also not covered, unless specifically listed at the onset of your policy, would be participation in extreme or dangerous sports.

The Waiting Period

With this type of insurance coverage, there is a waiting or deferred period before the policy starts to pay out to the individual. This can vary from one plan to the next, and can be as short as one month or as long as an entire year. When choosing income protection insurance, the length of this deferred period will have a direct effect on the pricing of the policy. A longer wait time will mean that the insurance will be cheaper.

In some instances, an employer will pay an individual for a certain amount of time before the insurance kicks in. When deciding, reviewing this information and realistically looking at the length of time that you can manage without any supplemental income could therefore determine the best insurance policy to purchase.

Ken Stanford is an insurance consultant and also contributes content for, an  income protection insurance uk company.  You also never know when you might need critical illness insurance, or redundancy coverage to protect against potential financial devastation.

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