Income Protection Plan Insurance Policy - Online Article

Income protection plan is an insurance policy that provides   the policyholder with a steady source of income in the event of   disability to continue working due to illness or accident. It does not   cover unemployment or redundancy due to other factors. The plan is   chiefly available in the United Kingdom and Ireland.

Although   slightly expensive, these plans take the stress and strain off the   client's shoulders and provide the best financial security in such   emergencies. They help people endure a period of unemployment due to   temporary income loss due to disability. The income, known as indemnity,   is usually fixed as a percentage of the policyholder's monthly salary.

Various   income protection plans are available with different specifications. A   few are specific to certain occupations. The plans will specifically   define incapacity to work. The policyholder begins to receive payouts   after a stipulated period of being off work as per the contract. This is   the deferred period - the time between a valid claim and commencement   of benefit payments. The cost of the policy largely depends on this. The   premium is more expensive with a shorter deferment period. The   policyholder's occupation, current outgoings, and the level of benefit   required also decide the payout.

Benefits

The income   protection insurance payout is tax-free. The premiums usually cover   around 65 percent of the gross salary. Annual or monthly payment options   are available along with many short-term plans catering to the   requirements and income demands of the clients. The proportionate   benefit encourages the policyholder to return to work after recovering   health. The waiver of premium option allows the policyholder to enjoy   policy benefits without paying the premiums. The plans are beneficial to   self-employed as they are not entitled to any form of sickness payment.

Limitations

A   professional guidance helps to choose a suitable income protection   plan. One should be aware of the limitations of these various plans. The   policies do not payout if the policyholder becomes unemployed for any   other reason than illness or accident. Knowledge of the type of   illnesses or accidents that a plan includes or excludes is very crucial.   The client should note the deferred period. Premiums depend on various   factors such as occupation, smoking habit, age, health, and the cover   required.

The policies limit the maximum benefits that a client   can entitle. Therefore, taking too much income protection cover is not   advisable. The client should not end up paying monthly premiums for a   policy that he may not be able to make a claim. Some policies may become   invalid with the change of occupation of the policyholder.

Income   protection plans protect the policyholders against their inability to   work due to accident and illness. They provide the required financial   support to the client during unfortunate situations. This can be   utilized to meet any of his expenditures such as mortgage, utility   bills, and personal secured and unsecured loans. But, these plans do not   insure against unemployment. One might also need to complement the plan   with other insurance policies for better financial security.

About the Author:

Income protection plans give solace and financial independence to the policyholders when they face redundancy due to injury or sickness. The income protection cover depends on the budget and timescale of the policyholder.




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