Income Protection Insurance

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Article published on 11th July 2008

Over the next few articles we will look more closely at income protection insurance.

First, an overview catchup:

As its name gives away, income protection insurance protects the policy holder if for some reason he or she loses his or her income. It covers a pre-determined percentage of one's income and is paid directly with the policy holder choosing how and where to spend it.

The policy will generally pay out after a fixed amount of time has elapsed since an income is lost (say through redundancy) but once it comes through it can be used to cover any monthly repayment such as loan, mortgage, rent, credit cards, school fees, food, gas, electricity and other utilities, or else to buy groceries or whatever.

This makes it far more flexible and useful than the vast majority of payment protection insurance policies, which generally just protect against failure to pay one particular bill.

The nature of one's career or job tends to dictate the circumstances under which one can claim on the income protection policy and also how much premiums will be. Jobs that are deemed higher risk of ending suddenly for whatever reason may incur slightly higher premiums.

Factors that are taken into account by insurers for this sort of policy tend to include one's age, occupation and lifestyle habits.

Premiums can be reduced by taking longer waiting or stand-down periods before you claim on them, or for shorter benefit periods. Over the years, if the level of cover provided rises, so will the premiums for the policy.

All of the above will be looked at in more details throughout the following articles.

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