Income protection insurance is perhaps the most practical and relevant type of insurance cover for every worker. Life insurance indemnifies the beneficiary only upon the death of the insured. But what if the insured is still alive but incapacitated? Unemployment due to sickness or injury causes extreme hardship. A worker’s loss of income due to unemployment surely affects his ability to support himself and his family.
Income protection insurance gives an unemployed worker a certain percentage of his last monthly income (usually 75% to 100%). Proceeds from income protection insurance are meant to take care of food, bills and other basic expenses while the insured is unemployed.
Without income protection, an unemployed person would have no means to pay for necessities. When a person is armed with life insurance coverage, you can only afford to die. Without income protection insurance, you cannot afford to live.
Income protection insurance pays a sick or disabled worker until he is able to return to work. It should be kept in mind that income protection covers unemployment from inability to go to work and does not require that it be caused by severe illnesses.
Even less debilitating sicknesses such as back aches or a broken arm are covered. If the incapacity is permanent and prevents him from going back to work, then he will be paid for the period agreed upon and stated in the policy. For some, income protection insurance will give monthly or weekly proceeds until 65 or even age 70 if you have chosen this benefit.
The premiums of income protection are computed based on the amount of income one wants to insure, the age and health of the insured, and the nature of his work or occupation. The good news is that these premiums are tax-deductible.
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