Five Things to Consider When Choosing Income Protection Insurance Policy

Income protection insurance is one of the tools that can help you to substitute monthly income if you are not able to work due to unemployment, sickness and accident. These days, even bare necessities can be quite expensive. If you want to get financial protection, you should make sure that you get the right form of income insurance protection. Here are things that you should consider:

  1. Choose a proper budget policy: With the right policy, you can keep the cost down while getting the right protection. You should know that income protection policy isn’t really a one-size-fit-all solution. There are factors that determine whether a specific policy is good for you. As an example, if you have an annual gross wage of $50,000; you can expect to spend more than $1,000 each month, depending on the insurance policy provider. When calculating your regular expenses, you should consider all essential monthly expenses, like food, education, bills and mortgage.
  2. Make sure that you are covered long enough: One common term used in insurance protection policy is the “deferred period”, which is the amount time that you are not able to work. Your premium will be lower if the deferred period is only one month, but it will be higher if the deferred period is 12 weeks or 3 months. In this case, you should make sure that the deferred period is realistic and you should take into consider how many months you can survive with zero income
  3. Choose the right occupation type: The type of occupation determines how your insurance protection policy works. There are different types of occupations that you need to choose.
  • Own occupation: Own occupation means the occupation that you can’t do if you, as the policyholder is incapacitated due to specific cause and you can’t do another job to replace it.
  • Suited occupation: Suited occupation means that the job is suitable based on your training and education. It means that people can become unemployed, because they can’t find a job that’s suitable for them.
  • Any occupation: Any occupation is a comprehensive coverage for incapacitated policyholder who can’t perform any kind of occupation.
  1. Be honest: Some policyholders intentionally lie when filling their application form to reduce their premiums. You should answer honestly to all questions regarding to family history, health, smoking habits, risk factors of occupation and others. These questions will have a real impact to the full cost of your premiums. When you want to make a claim, the insurer will always verify your latest situation. Insurers will always find out if you disclose any critical information. If this happens, you claim can be rendered invalid, which is a big problem financially. There are always good ways to bring down the cost of the premium without being dishonest about your situation.
  2. Choose an ethical insurance: When looking for policy for income protection insurance, you need to compare between various insurers. When checking a website, make sure that it’s verified by the FSA authorized broker. Some insurer websites are fake, they just grab your personal details and sell them to third parties for marketing purposes. FSA registered brokers should provide you unbiased advices on policies that match your situation.
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