Many people haven’t even heard of income insurance before. Income insurance, also known as income protection insurance, is pretty much explained by its name. It’s insurance that protects your employment income in the case of a mishap that prevents you from being able to work.
Protect Your Way of Living
One reason to consider income insurance is to secure your current style of living. Most income protection policies cover up to 75 percent of your insured income. If you become sick or injured and are unable to work, your income insurance will be vital in covering things like your mortgage and car notes. That way you can focus on getting better so you can get back to work instead of worrying yourself with how your most important bills are going to get paid.
Protect Your Investments
Another feasible reason you may need income insurance is to protect your long-term and short-term investments. You may have a savings account, CD, IRA-approved account or even a child’s college fund. When your financial situation hits a crisis, the first thing you’re likely to turn to is one of these savings accounts you have setup. If you continue to use your savings when you’re unable to work, you'll find your savings soon depleted. Income insurance will replace the income that you’re missing and will assist you in protecting your savings and putting you in a stable financial situation.
Protect Your Family
Your children are another great reason to have income insurance. This replacement income will help you keep up with their school tuition, as well as their other immediate needs. Grown up issues, such as losing income due to injury or illness, can cause great stress within the home and this is not something that your children should have to suffer from. Financial issues are one of the greatest problems in a marriage that most often lead to the dissolution of relationships. Income insurance can prevent your family from suffering from this problem and possible dissolution. Our children have enough stress in their lives and do not need to be further stressed by mom and dad’s financial issues - especially when there is a preventative solution.
What it Might Not Cover
Most policies will have exceptions to what it covers, though, called exclusions. Examples of exclusions that are common include:
- A pre-existing medical condition
- Injury that’s caused by your own actions
- Misusing or abusing drugs and alcohol
- Pregnancy
- Illness or injury that’s the result of participating in riots, war or terrorism
If you have a particularly dangerous job or have certain health problems, you might not even be eligible for income protection.
When it Might Not be Worth it
Income protection insurance isn’t needed by everyone, either. There are some cases where it might not make a lot of sense. A couple examples include:
Sick pay benefits – If you have a really good benefits package from your employer, then it might not be worth the money to invest in income protection. How long does your sick pay provide compensation? Is it enough to cover important bills and day to day expenses?
Retirement – Are you getting close to retirement age? If so, it might make more sense to simply take early retirement if something were to happen that prevents you from working
