Income Protection Insurance

Income protection insurance is an insurance plan that pays out an income to the policy holder in the event of illness an injury which prevents them from working. The main principle of income protection insurance is to financially help you during the period of time you are unable to resume your working position and capacity. Most income protection plan will pay out a regular tax free monthly income but this can be limited to around 50 percent of gross earnings. Higher earners may not qualify for the full limit in monthly payout as most plans will have an absolute maximum payout per month

There are various types of income protection insurance policies available so before you go ahead and buy you need to be clear on what exactly you want it to cover you for. Make sure you read the small print of any income protection insurance policy and above all ensure it will pay out at the time you require.

Of the many types of income protection insurance the most basic is that which pays out an income should you become unable to work as a result of accident, sickness or unemployment. However, the broader definition of income protection insurance may include other products such as Mortgage Payment Protection Insurance, Payment Protection Insurance and International Income Protection. Such insurance plans which protect mortgages, loans and credit cards are also sometimes referred to as Accident Sickness Unemployment.

The majority of people need to work in order to survive and pay the monthly bills. Without a regular income such bills cannot be paid and without income protection insurance the only thing you can possibly fall back on is your savings, providing you have any. By law employers must pay employees statutory sick pay for certain periods but this could be a lower amount to your actual earnings. Although here are some employers who pay out for longer periods some may refuse to pay out after a certain period of time, particularly if they know you can never return to work. In such cases employment is often terminated.

For those who are self employed being incapacitated could result in little to no income coming in whatsoever, unless of course valid income protection insurance or other scheme is in place. Therefore, although it would require a monthly premium, income protection insurance could well be worth every penny if it means receiving financial support in the event of be unable to actively earn an income.