If you live in Australia, Ireland, the UK, New Zealand or a few other countries, then you may have heard about income protection insurance at one point or another.
Income protection insurance is a type of insurance that pays those who hold the policy when something happens to them that prevents them from working. This may be due to some sort of health problem or even an accident. There are many different reasons for why you might need income protection insurance.
I have heard of people completely skipping over income protection insurance because they think that it’s too expensive. However, that is just a myth – there are many affordable policies out there and you might find it worthwhile for you and your family’s finances if something were to happen to you.
Below are the positives and negatives to buying income protection insurance:
What are the positives of paying for income protection insurance?
This type of insurance is not free, so you may be debating whether or not you can fit it in your budget. If you are thinking about that, then you should weight the positives and the negatives.
There are many great positives of having and buying income protection insurance. These include: payments on a weekly or sometimes on a monthly basis; tax free payments to policyholders; payments are guaranteed and the company that offers income protection insurance cannot cancel a policy if the person who bought the policy always pays the insurance premiums on time; and so on.
You can reduce your lost income with this type of insurance and cover up to 75% of your monthly income if you meet some of the requirements. Depending on your income, this means that you may be able to receive up to $10,000 per month paid to you.
Premiums for income protection insurance are not always expensive. Sometimes they can be bought for less than $6 each week. You can find out more about find out more about income protection and the costs through AAMI.
Are there any negatives of holding income protection insurance?
There are a few negatives, but the positives may outweigh the negatives. It is all up to the individual policy holder though. Some of the things that you may want to think about include: policies may be cancelled if you become unemployed due to something not related to a health problem or an accident; there are exclusions to pay outs which can sometimes include drug/alcohol issues, criminal issues, and so on.
Do you have income protection insurance? Why or why not?
Are you thinking about buying it now after reading this article?
Image via Flickr by Nina Matthews