What is Income Protection Insurance?

Income protection insurance was previously known as PHI or permanent health insurance. Income protection insurance is a long term insurance policy that pays you an income even when you are not working but only due to an injury or illness. Income protection often pays out till the person’s retirement, death or till he returns back to job. There are some short term policies which are now available and hence are also cheaper. Income protection insurance does not pay benefits in case you have been made redundant but definitely can help you get back to work if you are sick or injured.

Income protection insurance is a must for all those who are working and especially for those who run the risk of being out of work due to illness or injury. The payouts are generally based on certain percentage of your income and the generally it is 50% to 70%. However, in some case it can be as high as 85% of your income. The payment made is tax free and hence a great relief. All the income protection insurance plans have a waiting period and hence one should know that the benefits will get paid only when the waiting period gets over. The waiting period can be 30 days, 60 days, 90 days and even up to 2 years. The longer is the waiting period lesser is the premium amount.

Some of the employers cover for their employees for a year or so in case of sickness or injury. In such case one can choose for a policy with deferred period of 12 months. The state benefits are also available in such cases but are very low and mostly does not suffice for the average salary of a wage worker and hence require private insurance.

Taking up income protection insurance helps you to pay out your monthly bills and any mortgage that you may have even when you are not going to work due to illness. It also helps you financially secure your family and provide for your children education even when you are not going to work. The disability or illness is defined by the insurance company and must be fulfilled to avail the benefits. Shop around for the best insurance companies which will give you the best deal on your income protection insurance plan. So, if you are working, income protection insurance should be on your priority list.