How Income Protection Insurance Works And Why To Consider It

Although it may not be something we spend much time contemplating, any of us who rely on employment for our living income are at risk of losing it unexpectedly. Whether this is through misguided actions or, as is more often the case, no fault of our own, we are not without the means to protect ourselves when things don’t go according to plan. 

As safety nets go, none is more welcome or effective in these times of pressing need than income protection insurance. It represents a lifeline in troubled times, providing peace of mind knowing we have it in place and essential financial assistance when our regular source is cut off. 

Income protection insurance: How it works

The simplest way to view income protection insurance is as a replacement for your regular income if it is halted or unavailable for any of the reasons covered by the policy. These reasons typically revolve around sickness and injury, although others exist. Any claim based on medical issues requires an official report confirming the details of the condition and its effect on the policyholder’s ability to work normally.  

Eligibility for income protection insurance

To be eligible for income protection insurance, applicants must be:

• Aged between 18 and 59—These standard age restrictions apply in most cases; however, applicants in ‘high-risk- occupations may experience additional restrictions.

• A naturalised citizen/legal permanent resident

• ‘Gainfully’ employed/self-employed for at least 20-30 hours per week (depending on the nature of the employment). In legal documents, ‘gainful employment refers to a legitimate position that provides steady, predictable income. It implies that the salary allows self-sufficiency and, if appropriate, the ability to support family members. 

Situations not covered by income protection insurance

Most standard income protection insurance policies will not pay out in the following circumstances: 

• Pregnancy 

Maternity leave or absences due to pregnancy-related health issues are not typically covered by an income protection insurance policy. 

• Suspension from duties

Irrespective of the reason and whether it is contested, standard income protection insurance will not cover any temporary or permanent suspension period.

• Criminal behaviour 

Injuries or absences that result from criminal activity are ineligible for remuneration. This includes recovery from injury or periods of incarceration.

• Self-inflicted injuries

Periods of inactivity due to self-harm are ineligible for a claim against any income protection insurance policy. 

• Acts of war 

No claim can be made in the unlikely event of absence from employment due to an act of war. 

Researching income protection insurance policies  

When looking into income protection insurance policies, the following advice is well-heeded:

• Pay close attention to the fine print—Carefully review any quote for coverage and note any significant features. 

• Use comparison sites—An excellent resource for direct comparisons, eliminating unwanted policies is fast and straightforward using trusted sites. 

• Contact your shortlisted providers—have a prepared list of questions and points needing clarification and note the efficiency and demeanour of the representative. These are the same people who will handle any claim you make, and their customer service is critical to the efficiency and ease of your claim. 

• If unsure, seek professional advice from an intermediary or experienced insurance broker. 

Conclusion: Is income protection insurance worth purchasing?

Without question, if you can afford the premiums for income protection insurance and are in a position where loss of income would be problematic, it is worth having. As much as it pays to have an attitude that focuses on living in the moment, we cannot predict the future. However, life can rapidly become problematic if we lose our income for reasons beyond our control. Income protection insurance takes this worry out of the equation, provides excellent support, and allows us to get on with our lives.

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