If you are the sole breadwinner for your family, how would you manage if you lost your income for some reason beyond your control? If this would cause you major problems, maybe income insurance is something you should consider.
Income insurance is also known as Accident, Sickness and Unemployment (or ASU) insurance. This is because those are the main situations you are covered for.
If you aren’t familiar with income insurance, you will probably have a number of questions about it.
Will I be eligible?
You will be eligible to apply for one of these policies if you are:
• Aged 18-65. If you already have a policy, your cover ceases on your 65th birthday.
• Normally resident in the United Kingdom.
• Currently employed in the United Kingdom. You need to have been employed continuously for a minimum of six months, for at least 16 hours per week.
What is the cover?
Income insurance or ASU will pay out if you lose your income from circumstances beyond your control. For example:
• If you are involved in an accident and receive injuries which render you incapable of working.
• If you are diagnosed with a serious illness which makes you unable to work.
• If you are made involuntarily redundant.
The first payment is made at least 30 days after you have become unable to work. Some policies start paying out after 60 or 90. You can pay a higher premium and opt for the payments to be backdated to Day 1, though the actual money will still not arrive till Day 30. The benefit will be payable for 12 or 24 months, depending on the option you select when you take out the policy. With most plans, the maximum benefit will be £1,500 per month or 50% of gross monthly salary, whichever is lower.
Are there any exclusions?
There are situations in which the insurers won’t pay out. With most policies, these include:
• If the condition preventing you from working is self-induced. This includes self-harm, and injuries resulting from a suicide attempt.
• If the condition is something you had suffered from in the 12 months before you took out the policy.
• If it is caused by drug or alcohol misuse.
• Conditions relating to normal pregnancy or childbirth are not covered.
• AIDS/HIV-related conditions are excluded.
Do I need a mortgage?
Some income insurance plans will only cover you if you have a current mortgage. If you don’t have one, you need to check this when you take out the insurance.
If you decide that this kind of insurance is suitable for you, you need to examine any policy very carefully before committing yourself. The plans vary enormously, both in exclusions and in levels of cover. Provided that you make sure you find the plan that is most suitable for you, income insurance could prove of enormous benefit.