If the world has learned anything in the past few years while struggling with the COVID-19, it’s that income insecurity is awful to experience. The anxiety that comes with having to live from paycheck to paycheck or feeling uncertain as to where our next meal will come from…it’s not something anyone should have to experience. Are there ways we can avoid it, though?
While it is impossible to predict when we’ll lose a job, there are ways that we can protect ourselves. If you live in Australia, New Zealand, the United Kingdom, or Ireland, you could utilize a program known as income protection insurance. With the variety of plans out there, you are almost guaranteed to find one that suits your needs.
Skepticism with promises like these are only natural, of course. So, if you’re not familiar with what this type of policy is, you might want to look at further information on this page: https://moneysmart.gov.au/how-life-insurance-works/income-protection-insurance. I recommend taking a peek and getting a brief introduction before continuing.
What is it?
The primary function of a policy like this is to pay some of any income that you lose due to an inability to work. This might be caused by a disability or a prolonged illness, for example. Unfortunately, the latter is something many of us have dealt with recently. Knowing that we can protect ourselves, though, is a welcome comfort.
Regarding the protections you can receive, just keep in mind that there are some limits. In the first six months, you might receive as much as ninety percent of your prior income. However, after that, it is usually lowered to seventy percent of said income, and a period of time is established for this.
This is calculated using your earnings from the previous calendar year, so a twelve-month period. Regarding that period of time that I mentioned above, it could be a few different things. For example, it may just be until you are able to work again. However, it could also be once you retire, once the policy ends, or once you pass away.
When selecting a plan, I recommend inquiring about these term lengths. There are a few other things of note as far as they are concerned. While you have the plan, you can claim it as many times as you need.
Say that you break your wrist and are unable to perform your job for a few months. If you injure yourself again while you still have your insurance, you will be able to get your benefits again. I highlight this as something to remember as it can be important if you end up in a circumstance where you thought your injury was a one-time occurrence, but the underlying cause ends up being chronic.
Do You Need One?
There is debate on this question, to some extent. In certain fields or professions, it might seem unnecessary. That being said, preparing contingency plans is never a bad thing. Additionally, if you are someone who owns a small business or store, a gig worker, or a freelancer, it might be something to seriously consider.
As far as how to get the right income protection insurance cover, an internet search or two can be of assistance. There are many companies that offer these coverage plans if you feel you could benefit from one. Some other circumstances that it could be a good idea are if you have people who live with you and/or are dependents or if you have debts that you need to pay each month, meaning that a lack of pay would be devastating.
If you’re still uncertain, though, I recommend discussing it with a financial advisor. They might be able to help you determine if you could benefit from one in the long-term especially. Thankfully, they are not too hard to find.
How Much Does It Cost?
I know – this all sounds great, so you’re probably wondering what the catch is. As with most things in life, it is the price tag. While these plans are usually not exorbitant in cost, there are some factors that can determine what you’ll be paying.
These include things out of our control like our age or our family medical history. However, other things like what our job is, whether we smoke or not, how much income you want to cover, and the waiting period until you get the payout can all play a role in determining overall payments.
Things to Remember
Nobody likes to go into things blind, so I’ll offer some more pieces of advice if you’re planning on purchasing an income protection insurance policy. When you are filling out any necessary paperwork, it is critical that you do this correctly and in detail.
If you have a chronic condition or there is anything in your family medical history and you omit this, the insurer will likely find out. This means that if you need to collect a payout, you might not get it because of the lie. Obviously, we don’t want this to happen.
After that, consider what type of coverage would suit your needs based on your profession. There are three levels to remember. The first is any occupation, which means you are too sick to perform any type of work. Next is suitable occupation, meaning you are too sick to do a job that is similar to yours. Finally, there is own coverage, for if you are too ill to specifically do your own job.
As you think about that and the different costs associated, be sure to read over any contract or paperwork to sign and look at the fine print. In other words, look for hidden fees or anything that might result in you not being able to file a claim. If you do end up changing your mind, you can cancel your plan within the first days of purchasing with no further fees.
Why is This Relevant?
As I have alluded to a few times already, it is an unfortunate reality that unemployment rates are rising around the world. You can see some statistics for Ireland on this website. Tragically, there are people who lose their jobs due to a disability or an illness that they can’t control.
They deserve to have something to fall back on. Without protections, they could end up in dire situations. No one wants to be there and have to rely on the kindness of others to keep themselves afloat. So, planning for the future is something you should probably consider doing.
An insurance policy like this might save you from having to dip into a savings account or a retirement fund, too. That slush cash that you’ve been trying so hard to keep safe and not use deserves to stay where it is – waiting for you and your post-working years.
Don’t jeopardize that by neglecting your income security in the present. While these policies do come with fees, that is simply the nature of having insurance. That doesn’t retract from the usefulness of it.
As inflation rates rise around the world, that’s another thing we have weighing on our shoulders. Luckily, income protection policies do account for this organically because they are based on your own income levels. Hopefully, your wages reflect these prices.
My recommendation is that you don’t delay in securing your currently quality of life and standard of living. Investigate these plans today. Do your own digging and come to your own conclusions, of course, but act with haste. You never know when you might get sick or hurt.
You and your family deserve to rest easy at night knowing that such an event doesn’t have to be as devastating as it could be. That peace of mind can positive impact several aspects of your life.
