Is income protection insurance worth it?
The coronavirus pandemic has forced many people to take a closer look at their finances - and in particular, how they can protect their income due to the sudden increased risk to their health. In this post, we'll be answering the commonly asked question; is income protection insurance worth it?
What is income protection insurance?
Income protection insurance is a type of insurance policy which is designed to provide support in the form of regular monthly payments if you find yourself unable to work either due to illness or injury. It will usually replace a proportion of your income until you either return to employment, retire, die or end the policy.
Income protection insurance: The key facts
- Both short and longterm policies are available. A shorter term policy will normally have lower cost monthly premiums.
- Income protection payments are tax free
- It provides peace of mind that you'll be financially secure even if you find yourself unable to work
- Payments start after an agreed deferment period - this will usually be after your sick pay ends. The longer you defer payments, the lower your monthly premiums will be
- You can claim as many times as you need to for the duration of your policy (although there are restrictions on the time allowed between claims)
- Payments will be a percentage of your salary (usually around 70%)
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So, is income protection insurance worth it?
According to the Association of British Insurers, around one million people find themselves unable to work due to illness or injury every year. This year, coronavirus has led to even higher numbers of workers being forced to take time off.
If you were suddenly unable to work for an unknown period of time, would you be able to cover your household bills? If the answer is 'no' - or even if you're not sure, then it's worth getting some advice about whether income protection insurance is a sensible option for you.
Here at BB Mortgages, we offer completely free consultations with one of our expert advisers and it can all be done via video call and email so you don't have to worry about putting yourself at risk or breaking social distancing rules.
Who doesn't need it?
Of course, there are a few instances where income protection insurance probably isn't worth it for you. For example:
- If your employer provides longterm sick pay
- If your savings can cover your income
- If you're able to take early retirement
- You can cover your costs through government benefits
How much does it cost?
Your monthly premium costs will depend on a number of factors such as your age, job, medical history and, as mentioned above, how long you choose to defer payments. To make sure you get the best deal available for you, we definitely suggest you speak to an expert.
Don't forget that BB Mortgages are offering free consultations so if you're considering income protection insurance, make sure you get in touch to book yours!