Choose the right policy for your needs
THERE are several types of insurance policy which can protect your income – so make sure you know what you are buying and how it will cover you if you cannot work.
INCOME PROTECTION:
This pays a weekly or monthly benefit, typically between 50 and 70 per cent of salary, in the event you are unable to work due to an accident or illness.
There is usually a delay between the policyholder being unable to work and payments being made – known as the ‘deferred period’. This is typically one or three months, although it can be six months.
Payments are made until the policyholder returns to work or until retirement age or death.
You can claim as many times as you need while the policy is in force.
ACCIDENT, SICKNESS AND UNEMPLOYMENT:
This can help meet monthly expenses in the event you lose your job through no fault of your own.
It pays out a proportion of your income each month, typically for up to 12 months. Policyholders can opt to have payments made from day one at a higher cost or have a deferred period, such as three months.
Unemployment cover is not appropriate for the self-employed.
LOAN, PAYMENT AND MORTGAGE PROTECTION:
Cover is linked to the repayments on a loan, credit card or mortgage.
The insurance pays out to cover the monthly debt repayments in the event you lose your income due to redundancy or illness. Policies usually pay out for around 12 months.
Always check the cover you have is appropriate and that you would be able to claim.
CRITICAL ILLNESS:
This pays out a lump sum on the diagnosis of a critical illness, medical condition or permanent injury listed within the policy. For example, cancer, stroke, heart attack, multiple sclerosis or loss of a limb.
Policy terms, including the illnesses covered, vary widely between insurers.