Pros and Cons of Income Protection Insurance

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Income Protection Insurance can provide that much needed protection should you lose your job due to accidents, illness, or unemployment. Just like many other financial undertakings in life, it entails various pros and cons which you should carefully consider before getting a policy.

Pros

Can help you handle short- term needs

The beauty of Income Protection Insurance is that you can choose between term durations. So, if you have current loans or debts to pay, and you’€™re afraid that losing your job might mean not being able to pay them, you can opt for Income Protection Insurance so that you’€™ll be able to handle your obligations while you are yet to get back on your feet.

Can protect you for the long- term

On the other hand, you can choose a longer IPI term, such as five years or so if you feel like you will need longer coverage should you be unable to work.

Can provide protection if you get injured outside the workplace

While you may receive benefits if you get injured while at work, IPI can cover you even if your injury or illness is non- work related. As long as it doesn’€™t belong to the policy restrictions, you can make a claim if you get sick or disabled.

Longer waiting periods can mean cheaper premiums

Income Protection Insurances involve a waiting period wherein you will start receiving benefits after you’€™ve become disabled. This period usually ranges between 30 to 90 days. If you have some work benefits and savings which are sufficient enough to help you in the first few weeks or months since you stopped working, you may want to opt for a longer waiting period so the premiums will be cheaper.

Cons

Cannot protect you from known risks

If you are a seasonal or contractual worker and the likelihood of losing your job is high, you may not qualify for a cover. Likewise, if you are a smoker or have a certain illness by the time of application, it might not be easy to get approved, or you would have to pay a very high price to lift these limits.

There are certain policy exclusions

In order to limit their risks, insurance companies have set exclusions to which they will not pay out benefits, such as present medical conditions, dangerous jobs, and activities. The insurer may not pay in the following situations:

  • If you injured yourself on purpose
  • If you get disabled or injured during war, riots, or terrorism
  • If you’€™ve been involved in illegal activities
  • If you’€™ve been found to be using drugs or alcohol

May not be suited if you have low income

There’€™s only a certain amount of benefit you can claim with IPI, which is usually 50% of your salary. If you have an already low income, your monthly benefits would be significantly lower, which might not be enough to tide you over during your jobless days.

As beneficial as it can be, Income Protection Insurance is not for everyone. Make sure you know the twists and turns before you decide it is for you.

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