Income protection insurance is what its name suggests – insurance to protect you against losing your income. It’s sometimes known by other names like Accident, Sickness and Unemployment insurance (ASU). Basically, it would seem to be a sensible precaution for anyone who doesn’t enjoy good security from his or her employment situation.
So if you are trying to decide whether this type of policy is something you should consider, a good first step would be to look at your own employment conditions, and at your own health situation.
• If you are self-employed, income protection insurance could be a good idea, especially if you have a mortgage.
• If you are in permanent employment, look carefully at your conditions of service. If your employer has good sick-pay provision in place – that is, one that pays full or part salary for six months or a year after you go off sick – then you probably won’t need income protection insurance. If you’re not sure, then ask. If there is no sick pay policy, you should seriously consider protecting your income.
• If you are 65 or over, even if you’re still working, you won’t normally be eligible for income protection insurance. Of course, if you’re retired, it won’t apply to you. If you already have a policy, your cover ceases when you reach your 65th birthday.
• Before signing up to any income protection insurance policy, make sure you are aware of the conditions it does not cover. Many policies exclude such things as: HIV/AIDS-related conditions; pregnancy; self-inflicted injury; injury due to a criminal act; drug or alcohol misuse. If you consider that your inability to work is likely to be related to any of these things, it might not be worthwhile for you to take out the policy. Of course, the policy would exclude any condition from which you were already suffering when you took out the policy.
• If you haven’t got a mortgage, check any policy carefully before you commit yourself. Some policies require that you have a mortgage, while others do not. Of course, even if you don’t have a mortgage, you will undoubtedly have other essential outgoings such as rent and monthly bills, so income protection insurance is still important.