Income Insurance Is it Important?Here’s another quick question for you; what is the most valuable asset in your life today? Chances are you might answer your car, your growing savings account (well done on that by the way) or maybe your home. But you’d actually probably be wrong. These things are all great to have and are certainly important keys to your wealth building and general financial security, but they are likely not really your most important asset, your most important asset is yourself.
Income Insurance Is it Important?
How Valuable are You
Before you think we are going all spiritual here when we say that you are your most important asset in this instance we do mean financially. Give it some thought for a second, what would happen if you lost your current income, if only for a relatively short time?
For most of us, so many things depend upon it. Your ability to pay day to day bills. The ability to pay for the insurance to keep that car on the road. The ability to pay your mortgage to keep that roof over your head. The ability to pay for the medical cover you and your family need. And maybe even the ability to actually keep everyone well fed.
Often losing your income occurs without any warning at all. Consider that any one of these ‘life triggers’ may impair your ability to earn a living either temporarily or permanently:
- An accident (in your car, at home, at work)
- A short term illness or injury (broken bones, unexpected surgery)
- A long term illness (chronic conditions like the effects of heart disease)
Even if you have a decent amount in your savings account once your income is gone that is likely to be eaten up very quickly. So what is the answer? We have given you a hint already, its Income Insurance
What is Income Insurance?
In fact, its name describes it very well. It’s insurance that offers you financial protection in the event that you lose your income. It’s also known in financial circles as income protection insurance and it’s something that not everyone in the world has access to. Although it is fairly easily available here in South Africa and in many European countries it’s practically unheard of elsewhere so in some ways we are the lucky ones.
Basically IPI specifically offers benefits to those incapacitated by illness or injury. It won’t cover you if you are laid off, or you quit your job, but it will offer financial protection in the scenarios we just discussed, and that could be a life(style) saver.
What You Need to Know About IPI Policies Before You Buy
So, we’re guessing we very well might have caught your attention and now you are at least thinking about looking a little further into adding an income insurance policy to your overall financial coverage. And once you head out onto Google and start looking for one you’ll find that there are plenty of options available to you. There are some facts you should keep in mind as you shop though:
Deferment Periods – Almost all IPI policies are subject to a deferment period, an amount of time that must elapse between your loss of income date and the date when your insurance payouts begin. This can be as little as 2 weeks and as many as 52. You’ll need to make sure you know what this is for each policy you consider.
Restrictions – There are some kinds of illness or injury not covered by many IPI policies, These can include anything that can be directly linked by a medical professional to drug or alcohol abuse, an injury sustained during the commission of a crime and usually pregnancy is not considered a reason for an IPI payout either.
Tax Implications – In some cases the activation of IPI coverage may affect some of the ‘tax breaks’ you have been enjoying. For example, tax relief on pension contributions is likely to be suspended.
Getting Help
Finding the right income insurance policy for you will take a little time and research. Sometimes working with an independent insurance broker may be the way to go as these folks know their stuff but don’t have a loyalty to any one company to colour their recommendations. Leaving them to get on with the research will also leave you free to keep on working, playing and enjoying your everyday life!
Income Insurance Is it Important? We think you will agree with us Income Insurance is perhaps one of the most valuable Insurance policies you should invest in. Speak today to one of our Professional Consultants to find out more.
Could You Make a Passive Income?