MoneySupermarket Income Protection InsuranceAs the economy continues to stumble, many households are looking to cut costs where possible and inevitably, insurance is under the spotlight.
Income protection insurance (IPB) is not a cheap benefit and some may be questioning whether it is a good investment given the limited funds that many households are struggling to manage on.
Income protection insurance is designed to pay out if you are unable to work due to accident or illness but does not usually cover redundancy as standard. Some insurers do offer bundled cover where they agree to pay out whether the reason for stopping work is ill health or redundancy.
However, the amount paid out is far from straight forward and you will not simply receive a payment in lieu of your full salary should the worst happen. Most policies have a clause stipulating that you will not be paid more than 60 or 75% of your salary, regardless of how much cover you paid to take out in the beginning. Be also prepared to have to provide financial information as well as possibly undergo a medical examination to prove you are not well enough to work. Even once you receive the money, the insurer will stay in close contact to ensure you tell them if you find new work or if you recover sufficiently to go back to your job.
The insurer will also expect you to make reasonable efforts to stay at work if possible and if not, to co-operate with any suggestions to speed up your rehabilitation.
In addition, the vast majority of IPB policies do not take effect straight away but only kick in once you have been unable to work for a continuous period known as the deferred period. This can vary from one week upwards, with most policies having a maximum period of 12 months. During the deferred period you will not be eligible to receive any money from your insurance, so opting for a long deferred period when you set up the policy may work out cheaper in the short term but be crippling if you are off work.
Despite the complex nature of the policy, it does provide undoubted benefits, many of which cannot be obtained elsewhere. Employers will usually only pay wages whilst a worker is off for a short period of time and the state benefits are for most people, nowhere near enough to pay their financial commitments.
In addition, during times of financial hardship in the nation, the rate of stress induced illnesses can be higher. For example, self employed individuals who are struggling to keep their business going can become so anxious they are unable to work, whereas others may just be worrying so much about their debts they become incapacitated by depression. Both of these scenarios would be covered by IPB, providing welcome respite from financial woes at a difficult time.
IPB is the most use if you do not have existing insurance in place from other providers. However, some financial products such as buy to let mortgages can be covered by their own sickness and redundancy policies. This does not mean that IPB should not be considered, but it may be worthwhile lowering the cover, which will have the added benefit of making it cheaper.
* This article was provided by MoneySupermarket.co.uk
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