Income Protection Insurance And Why It Should Be On Your Radar

In times when it seems we are bombarded with new and evolving forms of protecting ourselves and our loved ones with insurance, we might be forgiven for approaching the subject of income protection insurance with a touch of cynicism. However, the picture takes a different look when we discover its benefits. Income protection insurance can mean the difference between horrendous financial difficulties and a relatively easy existence during times of crisis and should not be dismissed without further investigation. 

What Is Income Protection Insurance, And How Does It Work?

A basic description of income protection insurance is that it is a policy designed to replace most of your income from regular employment if you are incapacitated and unable to work. The reason must be legitimate (typically involving sickness or injury), and there are some significant eligibility requirements, exclusions, and caveats we will explore in the following sections. 

Eligibility For Income Protection Insurance

Individuals will only be accepted for income protection insurance if they fulfil the following criteria:

• They must be a citizen (naturalised or otherwise) or permanent resident
• Individuals younger than 18 or older than 59 will, typically, not be offered coverage. This upper age limit can be reduced further if the occupation involves a high risk of injury or illness. 
• The period of employment must be for no less than 20-30 hours per week (again, this depends on the occupation in question)

Exclusions And Other Caveats

The following circumstances will nullify any standard income protection insurance policy. Whether the nullification is permanent or merely for the duration of the condition in question varies and is something you must research before acquiring any policy. 

• Absences Related To Pregnancy 

It is worth checking the exclusions here carefully, as the list of symptoms that invalidate any claim is long and complex. Any period away from work that can be directly attributed to an ongoing pregnancy renders the policy invalid, and it will not pay out. 

• Self-Inflicted Injuries 

Income lost due to deliberately self-inflicted harm will not be compensated for.

• Suspension From Employment 

If the policyholder is suspended (temporarily or otherwise) from work, no matter the reason, any shortfall in income is not eligible for repayment.

• Illegal Activity 

Criminality of any kind leading to unpaid absence from work, whether through injury or incarceration, will not be covered by any income protection insurance policy.

• War 

No coverage will be provided in the unlikely event that the policyholder is injured or incapacitated due to an act of war.

Please note: Any legitimate claim against your income protection insurance policy will require an official record, typically a medical report from a recognised medical practitioner that can be independently verified. 

Final Thoughts On Income Protection Insurance

Unlike some less complex forms of insurance, it is harder to say that income protection suits everyone. The exclusions are harsher than some other policies, and not all will be eligible. However, it is safe to say that if the premiums fall within your affordability range and you meet the stringent requirements, income protection insurance can be immensely beneficial. Not many of us can easily overcome the sudden loss of income, especially if we are injured or otherwise incapacitated. Knowing that we will be compensated when we cannot work is a great relief and assuredly worthy of consideration.