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Why Income Protection Cover Is Important

January 23, 2012 | Comments: 0 | Views: 145

Despite its lack of popularity, income protection cover is very important and should be encouraged for any adult in employment. There are several reasons why this cover should be mandatory for working adults and we shall look at each in turn here.

Risk Cover

An important part of life is planning for the unforeseen. Everyone needs money for survival. It is what pays the rent, allows us to buy food and take care of our bills. What we earn is what we live on. Thus, it is very important to plan for the possibility of any income loss. An age old way of survival when we are no longer earning is to dig into our savings, sell our property or other investment, beg, borrow, or steal. Taking away from savings places us in a precarious position financially and eventually those savings will run out. The same goes for selling our property. Begging or borrowing is embarrassing to do, while stealing is illegal and immoral.

To protect against the possibility that one can lose wages, an income protection cover should be taken up. It allows a worker to continue with the same standard of living he or she has always enjoyed even if they suffer an illness or get into an accident.

Policy Security

That small monthly payment to your insurer means that you don't have to worry about what you will survive on in the event you become incapacitated. It is important to note that as long as a policy holder continues to pay premiums, an insurer cannot cancel or fail to renew a policy. This allows a worker to guard against any loss of income in the long term.

In the event a policy holder wishes to cancel a policy, he may do so and is entitled to a full refund of all premiums that were paid. This means there is no loss to a policy holder, whether or not they decide to carry on with the cover.

Long Term Assurance

Although there are short term income protection insurance covers that guarantee payouts for a predetermined maximum period, it is advisable to invest in long term policies. Long term cover means that in the event of permanent incapacitation, a policy holder will be entitled to continued payouts from the end of the deferred period until when they start receiving pension. In cases where the illness is diagnosed as terminal, a policy holder can apply for a lump sum payment even before death.

Inadequate Sick Pay

Some might argue that sick pay still provides a source of income to workers in the event of illness. Even if a person qualifies for state mandated sick pay, it is more often than not, well below what wage earners normally receive. The small amount is not adequate to meet regular household expenses and meet other financial obligations. Income insurance cover returns a worker to their accustomed level of pay allowing them to pay their bills the same way they did before the illness or injury.

It is important to remember that income insurance cover does not include medical cover. That policy should be taken up separately. Income insurance policies do not cover medical expenses. They are designed to help meet regular obligations and see to it that the policy holder does not suffer any adverse effect to his or her living standards.

Find here the information about income protection and income protection cover.

Source: EzineArticles
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