Income Protection - How It Can Save Your Home
By David Farrell
Most of us live from paycheck to paycheck, and we need those regular payments to cover monthly obligations. Even those who have saved up for a rainy day may be up a creek if the paychecks are suspended for longer than a month or two. That’’s where income protection comes into play. Income protection insurance guarantees a percentage of your income over a period of time, should you become disabled and unable to perform your daily job. Disability could be due to illness, accident or a chronic medical condition, and could be as short as a few months or as long as a few years.
Income protection comes in many different shapes and sizes, so people can tailor a policy to fit their individual needs. This means that you must take some time to determine what those needs are so you can purchase a policy that will be a good fit for you. Variables in income protection insurance include how long it takes for the benefits to kick in, how much the benefits are and how long they might last. Your premiums will vary based on these factors, so you can purchase income protection insurance that will carry you through difficult times at a price you can afford.
Choosing a Policy
It is important to choose an income protection policy that will provide adequate protection for your needs. Most experts recommend a plan that will provide 60% of your annual gross earnings. This amount generally covers the mortgage as well as the basic necessities each month. You also have a choice in when the plan benefits will kick in. The longer you can wait after disability for the benefits to begin, the cheaper your premiums will be. However, you don”t want to be left without income for any period of time, so make sure you have enough in savings to cover your bills until the plan becomes active. Most policies will offer options of one month, three months or six months before benefits begin.
Income Protection vs. Mortgage Protection
Some homeowners believe that mortgage protection is sufficient coverage in the event of an illness or accident, and they don”t see the need for income protection insurance. Mortgage protection is typically more attractive because it is less money up front for peace of mind. However, it is important to note that the average mortgage protection only lasts up to two years, while income protection can cover you for up to 25 years - or the length of your mortgage. Income protection will also cover your other obligations, giving you even more peace of mind and offering a better value for the dollar.
If you are worried about what would happen to your family and financial obligations if you were no longer able to work, consider the benefits of income protection. For a low monthly cost, you can have peace of mind in knowing that your family will be covered if you become sick or injured and can no longer support them financially.
About The Author
David Farrell is Managing Partner of Affordablemortgages.co.uk a mortgage advice practice offering advice on bad credit mortgages across the UK
http://www.affordablemortgages.co.uk