Income Protection Insurance

Income protection insurance helps the policyholder who becomes incapacitated and is unable to work. This may happen due to a serious illness or an accident. Each policy may be different on what is considered incapacitated and will have limits on what it will pay. Income protection insurance usually contains a deferred period and a proportionate benefit. A deferred period delays the onset of benefits and a proportionate benefit will pay the insured a reduced benefit if he or she will agree to work part-time or take a lower paying job. Benefit limits are often around 60% to 70% of the policyholder's gross earnings. The policy may include a waiver of premium during the period that the policyholder is incapacitated but some policies are dependent upon the premiums being made each month even when the policyholder can not hold down a job. The benefits are not usually considered taxable income unless they are paid through an employer.

People who are past retirement age will probably not be able to qualify for income protection insurance. Policies cover adults who are still working at the time of an illness or accident that has caused them to become unemployed. After a person retires it makes sense to have life insurance and retirement benefits. Disability insurance is more important for the person who has a family and a home to pay the mortgage on. Some companies offer some disability coverage to employees but oftentimes it is not enough to cover what is needed. Of course that would depend upon the extent of the disability or incapacitation.

Common factors that may affect the premium for income protection insurance include age, occupation, earned income, health status and history, employment status, and if the policyholder is a smoker or non-smoker. Some insurers will want to know how much alcohol a potential policyholder drinks before they will cover him or her. Many insurance companies expect the person who is disabled to see a doctor and obtain written confirmation that he or she is unable to work and even then the premium will probably still have to be paid for coverage to continue. Becoming disabled can be a very troubling experience but having coverage to help during this time can provide some solace and God will lead through praise and prayer. "Cause me to hear Thy lovingkindness in the morning; for in Thee do I trust: cause me to know the way wherein I should walk; for I lift up my soul unto Thee" (Psalm 143:8).

When choosing a policy a person should look carefully at how the policy defines incapacitated or disabled. Finding coverage that will pay regardless of occupation is important. Some policies for income protection insurance have limitations and different definitions of restrictive disability. A good plan will cover even partial disability. Oftentimes a person will choose coverage based upon the most reasonable price. This is not a good practice when choosing disability coverage because there could be a big difference in the terms and limitations between different plans. The length of the benefits is a big thing to consider. Having coverage that only lasts for a couple of months and sometimes even up to a year may not be enough. A really good policy will continue providing benefits until a person is retirement age.

Some plans include trying to help the policyholder become rehabilitated. They often do this so that they will not have to continue paying benefits indefinitely. Income protection insurance may pay for the insured to have a rehabilitation counselor. A rehabilitation counselor can help the insured determine what options there are with vocations and if an education will be necessary to be able to become employed in the vocation of choice. Counselors that work for insurance companies may try to get the insured person to commit to become rehabilitated with the least amount of assistance or education because it keeps their cost down. This is one reason why a person should understand what the policy says before purchasing it. Some plans may state that once the insured is rehabilitated according to the insurance company's guidelines that benefits will stop.

Residual disability is an important feature when choosing income protection insurance because having it will provide a percentage of income loss after the insured returns to work even if he or she is making less than before the disability happened. A policyholder should check for the terms associated with this type of plan because there may be limitations even with residual policies. The benefits should continue until the person is able to make 75% or more of his or her previous income. In addition, make sure that the insurer can not cancel a person's coverage as long as he or she is paying premiums for that coverage.

Finding a policy that is non-cancelable and guaranteed renewable is the best type of coverage to have. Guaranteed renewable keeps the company from denying the policyholder renewable coverage for any reason or from changing the terms and benefits of the policy. Non-cancelable with income protection insurance means that the insurer can not change the policy just because the policyholder's circumstances change which makes him or her a higher risk. Nor can they add restrictions or limitations to the current policy. The coverage may have a guaranteed schedule of increases that is stated in the terms. Find out what the coverage says about premium increases and choose one that has a fixed premium.