If you’re like most people, you need your income to live. As equity partners who often must buy into the partnership and need to put money into the business before you are recognized as a partner, it is important that you are able to protect your income should you ever be unable to work due to injury or illness. This is where income protection insurance comes in.
Typically, income protection insurance offers will cover up to 75 per cent of your gross income, paid in monthly instalments. You may purchase two to five years’ worth of insurance, or you may have insurance until you reach the average age of retirement; it simply depends on the type of coverage you have.
The amount of money you end up getting paid will also depend on your coverage.
Agreed-value insurance is an expensive option, but it means that your payments will be reflected by your income level at the start of the policy.
Indemnity value insurance is the cheaper and more common option, however, your payments will be affected by any fluctuations in your income.
When to Make a Claim
In order to make a claim, you will need to fill out a form that includes evidence of your illness or injury. Therefore, it is recommended that you make the claim after seeing a doctor. The timeframe for your payment will also begin after the initial doctor’s visit.
Before you receive payment, however, you will experience a waiting period. This period can last anywhere from 14 to 90 days and is chosen when you select your level of coverage. Therefore, when you select your coverage (and your waiting period), it is important that you take into account any leave balances you might have, as well as access to emergency savings.
What’s the Importance of It All?
Life can be unpredictable, and there’s no guarantee that you will be well enough to work for the entirety of your career. In fact, it’s more than likely that at some point, you will be dealing with an illness or injury that prevents you from working and earning an income.
Unlike other forms of insurance, income protection insurance covers a wide range of conditions, including things like stress-related illnesses, which can be common in your work. Having income protection insurance means that you will be able to focus on your recovery, without having to worry about how to pay the bills or put food on the table. It also means you will be able to keep contributing to your wealth in retirement, something that is now more important than ever.