Income Protection Insurance Explained

What is Income Protection Insurance?

Income protection insurance provides an individual with an income in the event of an accident or illness occurring and preventing the insured person from being able to work. The income protection insurance policy usually covers the individual through the period of illness or until the individual recuperates from the injury and returns to work, retires or becomes deceased.

Income Protection Insurance Irrespective of Occupations

An income protection insurance policy is beneficial to individuals employed in both white collar and blue collar occupations as well as to individuals who are self employed. Income protection insurance is particularly beneficial to the self employed as their income would generally be affected immediately in the event of an illness or injury.

Criteria which affects your Income Protection Insurance Premium

• An individual’s usual occupation will contribute to the insurance company determining the premium of their income protection insurance policy. 

• The frequency of exposure to dangerous situations during the work day will also play a significant role in determining an individual’s income protection insurance policy premium. For example an accountant’s work environment is not as dangerous as the work environment of a manual labourer, thus the manual labourer will most likely have to pay a higher than average premium for income protection insurance. 

• The individual’s level of income and the income required by the individual following an injury to illness will also determine the premium of the income protection insurance policy. Note that most insurance companies place a limit on the percentage of income which individuals may insure. 

• The age until which income protection is required will also contribute to the income protection insurance premium. For example if an individual requires income protection until they are sixty five instead of sixty. This will results in a higher premium. 

• How quickly income replacement is required in the event of an accident or illness may also contribute to the premium of the income protection insurance policy. This may play a significant role for self employed individuals as they will require immediate income support following an accident or illness since their usual income will stop almost immediately.