A person’s capacity to earn income is the biggest asset by value. It is much bigger than a house probably, and it is much bigger than the value of your car. If you add up what you are earning every year and multiply it with the number of years you have been working, it will come out that the single biggest asset would be your ability to earn that income.
What would you do if you stop earning?
We ensure our house; we insure our car, etc. However, we never insure our capacity to earn an income. You can think of the impact that it would have on you and your family if you no longer earn money by working. You need an income protection plan to get yourself free from such fears.
What is Income Protection Insurance?
Firstly, it is a term based plan. It has a start and an end point. It starts as soon as you take the policy and it would end is usually selected by the person him or herself. The benefit that a person can get through income protection insurance is the regularity of payments. It is designed to replace an income rather than a lump sum benefit.
There is always a deferred period, which is the period at which the policy waits until it begins paying you. For instance, if you have an income protection policy plan and you get sick tomorrow, you will wait until the policy starts paying you. You can set 4 weeks. Eight weeks, 13 weeks, six months, a year or 2 years, etc.
The reason you do that is that you may have sick benefits payable for work. What you do is that you want that your deferred period must kick in after the work benefit falls off.
What are the conditions under which you must apply for an Income Protection Insurance?
There are strict definitions of what it means to be unable to work. They are 3.
- The first one says that you are unable to earn money for yourself and your family. This means that you cannot do the job that you were able to do before you became ill.
- The second one says that you do not have a suited occupation and you are not able to do your job or any similar job which suits you by your educational background and experience.
- Finally, for any income source, which means that you are unable to do any kind of job. This is the most important one because in this condition you are unable to do anything and unable to pay out.
You cannot ensure that you will need a specific amount when you get sick as your income protection insurance. It constitutes mostly 60 to 70% of your annual income. There are many other options, such as, payment protection insurance that people choose when they face difficulty. The PPI insurance lawyers deal such cases to guide people to use them for their benefits or, maybe to get rid of any problem that they might get into while using it.