First thing first, right off the bat: What's your biggest asset? Many people would say their house, their business, or their car. The reality is all these items depend on an even bigger asset: your ability to earn an income.
Your income is what enables to fund your lifestyle today, and create wealth for the future. That's why it's so worth protecting, and income protection insurance is one key way to do so.
Why income protection?
In short, income protection insurance is designed to replace up to 75 per cent of your gross income over a defined period, if you cannot work due to serious illness or injury.
Think of it as a safety net for the unexpected - the unforeseen events that life sometimes throws our way. While you can't always dodge those curveballs, income protection insurance could help you absorb the financial impact and get on your feet faster.
Tailoring your cover to suit your needs
Taking out income protection is pretty straightforward, but there are a few components to carefully consider.
- How much of your income would you like to cover? Depending on the insurance provider, you can insure up to 75 per cent of your gross income.
- How long can you afford to live without an income? When setting up your income protection cover, you'll need to choose a wait period - which is how long you'll have to wait between your eligibility for a claim and the moment the insurance company starts paying out. Depending on the size of your rainy-day funds, the sweet spot could be a few months or perhaps only a few weeks; it's up to you. The longer the wait time, the lower your premiums are likely to be.
- For how long would you like to receive your income protection payments? The payment period is another key decision. It could range from 2 years or up until age 65 or age 70. Again, the payment period affects premium costs: the longer you choose to receive the payments, the higher your insurance premiums will be - but the more peace of mind you'll have for the long term.
What else is there?
If you're looking for ways to protect your income, adding trauma cover to your life insurance policy could be another option to consider: click here to learn more.
Just like income protection, trauma cover is designed to protect you financially if you're sick or injured, so you can focus on your recovery. But unlike income protection, trauma cover has no wait period and pays out regardless of whether you're unable to work or not.
Also, instead of providing a regular income to partially replace your earnings, trauma cover pays out a lump sum if you one of the covered conditions, including cancer, heart attack and stroke. And you can use this amount as you wish - to pay off your mortgage, afford time off work, and tick things off your bucket list.
Visit the LifeDirect's income protection page to compare quotes from a range of insurance providers, and find how to secure your most important asset.
Need support? Call us on 0800 800 400, start a Live Chat or fill in our contact form to get in touch with our team.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.