There are two main types of income protection;
Should the worst happen and you cannot work, income protection insurance can act as a safety net and keep you on top of your financial commitments such as mortgage repayments, rent, utility bills, food shopping and lifestyle maintenance.
If you are too ill or injured to work and earn a salary, an income protection policy will pay you a pre-agreed sum of money on a monthly basis completely tax-free to help keep you afloat when you need it the most.
If you cannot work because of an accidental injury or debilitating illness you will notify your insurer to confirm your claim. Your GP will be required to confirm your condition to the insurer for your claim to be successful. Most insurers have a claim success rate well over 90%.
If you are claiming involuntary unemployment on your income protection policy you will be required to prove you are no longer working before you can be paid your income protection insurance benefit.
Long-term income protection, historically known as permanent health insurance, provides cover for accident and sickness only; you cannot take out a long-term income protection policy with unemployment cover. Cover usually lasts until you are able enough to return to work or a pre-agreed retirement age.
Short-term income protection, also know also known as accident, sickness and unemployment cover (ASU), replaces your income for up to 12 months in the event of a successful claim.
Only short-term income protection policies will cover unemployment and it can be included as part of an accident, sickness and unemployment (ASU) policy or as a standalone product.
To be eligible to make a successful claim on your unemployment policy you must;
The exclusion period is the pre-agreed period of time between when you took out the policy and when you can make a claim.
As with the amount of cover you have, you can also choose how long you would like your policy to last. It may be for a set period of time, for example thirty years, or a whole of life policy that will cover you until you pass away.
Insurers will make it very clear from the outset what will and will not be covered in your insurance policy. There are a few exclusions that will almost always be included;
Long-term income protection insurance policies will be medically underwritten so you know from the outset what will not be covered.
The cost of your life insurance policy will not increase unless you have a reviewable policy. During a reviewable policy you will pay the same amount for a number of years, maybe five or ten years, then review your policy to see if the cover is still in line with your requirements. At the point of review your premiums may decrease or increase.
You can choose to buy an income protection insurance policy to cover any of your monthly outgoings. You may choose to protect your mortgage repayments or rent, you may have a car lease that requires monthly repayments or you could decide to buy a policy to act as an income replacement to help with utility bills, mobile phone bills or TV and broadband contracts.
You can choose how much you want to cover and when you make a successful claim the money will be paid direct to you for you to with as you wish.
John just got Income Protection with Legal & General Short Term Income Protection for £33 a month
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Julia just got Life Insurance with Legal & General - Life for £11 a month