Many individuals are aware that they are able to cover their loan or mortgage repayments as the lender usually asks them if they wish to take out a policy. However you can also choose to cover your income against unemployment or incapacity due to sickness or accident. Income protection allows you to cover a wider range of outgoings by ensuring that if you cannot work or are unemployed through no reason of your own you would receive a replacement income.
There are standalone specialist providers who for a premium each month will allow you to insure up to a certain amount of your own income. This would then be paid back to you once you had been unable to work for a certain length of time or had been unemployed. The income would be tax-free and you would then be able to use it to repay all the bills you regularly maintain.
You would have the money to be able to pay your mortgage repayment when it was due and this is one of the biggest outgoings that you have to maintain. Failure to be able to keep up with the mortgage repayments means that you are at risk of having your home repossessed. Even by getting behind with just one monthly repayment the lender would send a warning letter and ask you to show how you can keep up with your mortgage along with repaying the arrears. If you cannot do so and continue to miss repayments then you would be at serious risk of losing your home.
With income protection behind you, you could also continue to meet any loan repayments you have or credit card debts. You would also be able to continue putting food on the table and pay bills to keep your home warm and lit. There would be no having to juggle your bills around in order to be able to pay them and this gives enormous peace of mind. It would allow you to concentrate on making a recovery and getting back to work or would give you the time to be able to search around and find work again at the same salary that you were getting.
You do have to shop around for the policy to get the best deal as the cost of protecting your income will vary greatly from provider to provider. The terms and conditions of the cover will also vary and these have to be checked when looking for a policy. These will hold the exclusions to be found in the policy and when cover begins and ends.
All income protection policies will only pay out for so long before the cease and there is also a waiting period of being unemployed or incapacitated before you are able to put in a claim. Some providers will offer protection that would begin to provide you with an income after 30 days; others may state that it could be as much as 90 days before their policy would payout. Policies can usually be taken out to supply you with an income for between 12 months and 24 months and some providers will offer to backdate your policy to the first day of becoming unemployed or from being unable to work.
If you do not want to be left struggling if you should lose your income through such as redundancy, then income protection should be considered. Income cover would allow you the peace of mind of a tax-free sum each month. This income would replace your own up to a certain amount and would mean you could continue paying essential outgoings.
While you could use your redundancy money if you had enough, this would make a big dent in it, especially if you were to be unemployed for many months on end. A better way of securing a monthly tax-free income is with income protection insurance. You would have to be able to maintain all of your outgoings if you did not want to see changes. This could include such as rent, mortgage, loan and credit card repayment. These are all essential as by getting behind on your mortgage means you are at risk of losing your home. Then you would have to take into account all other monthly outgoings. These include gas, electricity, food bills and any other outgoings.
When looking for income protection, go with standalone specialists for the policy. Check out several quotes in order to get the cheapest. All specialists will only sell payment protection and as such, you are assured of getting a quality product backed with experience. The terms and conditions should be checked as they can vary along with the cost. It is here where you can find valuable information about the protection. This includes when the cover would begin and end and mentions the exclusions that usually can be found in all cover.
The majority of providers offer policies that would begin to provide the policyholder with an income between the 30th and 90th day of unemployment. You can find that some providers will backdate the policy to the first day of becoming unemployed but not all do. Once you have started to receive an income that is tax-free, it would then continue for between 12 and 24 months. This will be stated in the key facts.
There has been problems in the past concerning payment protection products of which income cover is just one. This led to all polices being tarred with the same brush. Mis-selling was reported by the Citizens Advice and this led to an investigation into the sector. The Office of Fair Trading and the Financial Services Authority both made an investigation. The Financial Services Authority laid out guidelines that those selling payment protection, could follow. They also handed out fines to several well-known names on the high street before referring the sector to the Competition Commission. However, it is essential to remember that payment protection products can work.
The Financial Services Authority is planning to introduce comparison tables. It is hoped that they will make payment protection products more transparent. The family of payment protection consists of income protection, loan protection and mortgage protection. The tables will help the consumer to decide which policy would be the most suitable. This will be made possible by answering questions based on their circumstances. The tables will also highlight exclusions and make the consumer aware of the cost of a policy.
Simon Burgess has sinced written about articles on various topics from Mortgage Insurance, Finances and Income Protection Insurance. Simon Burgess is Managing Director of the award-winning , a specialist provider of. Simon Burgess's top article generates over 74000 views. to your Favourites.