Independent financial advice - income protection insurance
Take independent financial advice on getting adequate income protection insurance
What is income protection insurance
Income protection insurance, also known as long-term disability insurance or permanent health insurance, pays a monthly amount if you are unable to work because of an illness or disability. It continues paying until you recover and go back to work, or until you die or reach the policy termination age, usually 65. The most you can insure is usually 60% of your gross income. Some policies use a with-profits or unit-linked investment base, allowing a cash return on retirement, but take independent financial advice to get the right policy for your circumstances.
Why do I need it?
If you are an employee and you fall ill, your employer might pay you your full pay for a few weeks or months. By law, an employer must pay most employees statutory sick pay for up to 28 weeks, though this will probably be a lot less than your full earnings. After that, you would probably have to fall back on state benefits which are not generous. If you are self-employed, you have no employer to help, so you would have to turn to the state and would need independent financial advice to make sure that you didn't get into debt.
Is all cover the same?
Many employers already offer income protection cover, others offer only limited cover. In the latter case, it may be worth taking out your own policy as well. The terms of your policy will depend on how much cover you want, on your sex (women pay more) and on how long you are willing to wait between being unable to work and receiving some payment (deferred or waiting period). Independent financial advice says that your job also influences how much you will have to pay, with white-collar workers generally paying less. Your general health and medical history will also affect your premiums. In some cases, you will only be able to make a successful claim if you show you cannot do any job, rather than just the job you had been doing.
Not for profit
Insurance aims to put you back to the position you were in before you suffered a loss. But it does not allow you to make a profit out of your misfortune. So the maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost less an adjustment for state benefits you can claim. This is usually translated into a maximum of, say 50% to 65% of your before-tax earnings.
To find out more about income protection insurance, get independent financial advice today.
You can have a brighter financial future. If you would like independent financial advice about bridging loans call our experienced advisers today on 0870 803 1995 or e-mail mike.robertson@mraltd.com
