Protecting Your Income

Most people have insurance in case their home is destroyed, or they are in a car accident, or if they die unexpectedly. These are usually not second guessed because they are often required by law. There is insurance, however, that is not required by law, but should be in every responsible person’s portfolio. This particular insurance is called income protection insurance and it can help save your family’s finances in times of crisis.

If you do not know what income protection insurance is, this is a very straight forward insurance that will pay you if you are ever injured to the point of incapacity or are so ill that you cannot work again. This insurance will not cover injury that is sustained while on the job. That is covered under worker’s compensation.

For example, if you are vacationing and you break a leg while playing volleyball, this insurance will help your family keep afloat whilst you are recovering in the hospital and are unable to work. If you are hiking and you fall and break your back, this will also help your family replace your income until you can return to work.

An example of an illness that you might get is if you are a teacher and you develop breast cancer. The money that you have invested into this insurance could go to the medical expense of trying to treat this cancer and making certain it does not return. On the other hand, if you break an arm while trying to fix a machine at work, worker’s compensation will pay for the hospital bills.

That is where this insurance can step in. Typically, this insurance will pay approximately 75 percent of your salary to you for a set time period. The time period of payment is determined by you at the time that the insurance policy is taken out and can be written for 2 years, 5 years or up to when you reach 65 years old.

The premiums for income protection insurance will be taken from your pay check every time you get paid, much like how your taxes get taken out of your check without you having that money in your possession. The amount that the insurance company will take out is anywhere from two to five percent.

As with all insurance policies you will need to research exactly what you think you will need for your family’s financial well being, then plan to double that especially if you are the only person who is working in the household.

There are hidden things that you often forget to plan for, like dental, medical, and car problems that can surprise the most prepared person. So, be prepared for anything because it can happen.