There are a wide range of reasons that an insurance policy may be taken out. Some are mandatory like cars, property, land or any other item that acts as security against a loan, after all a mortgage is in fact a secured loan. However the take up for income insurance is so very low and industry experts are at a loss to explain why. Your home insurance policy will even cover some of the more mundane objects within your household. When people go away on holiday they will usually take out travel insurance to cover themselves in case anything happens while they are away. Why then, do so many people choose not to get cover for such an important thing as their income?
Let’s face it if your income stops for any length of time how do you plan to retain your existing standard of living ? The answer is you cannot because the meagre state benefits (that’s if you qualify for any) will certainly mean you have to cut down on the way you have lived before.
This can obviously have different effects on different people, it may mean that you may no longer be able to go away on holiday or you may find that you need to trade in your car. However the worst scenario is when you cannot pay your mortgage and the house is re-possessed. As well as the possibility of you losing your house, failing to keep up with payments will also mean that your credit rating tumbles which will only give you further problems in the future when you need to borrow again. A lot of people will not even bother trying to find out how much income cover would cost and yet they see mobile phone cover as an essential.
What product should you be getting to cover your income ? The industry name is Permanent Health Insurance (PHI) but it is more commonly known as Income Protection. The policy is called 'permanent' for exactly that reason - no matter how long a claim lasts or how many claims you make, your insurance provider cannot cancel your policy. The policy can be taken out so it coincides with your retirement age so someone taking out a policy at 30 and intending to retire at 65 would have a policy lasting 35 years. All benefits are tax free and it can be designed to fit around most occupations, for example a self employed person would probably want benefits to start ASAP but someone employed who receives full pay for six months would defer payment for that length of time.
Obviously the longer you defer receiving benefits the cheaper it becomes. The government have set out some guidelines regarding the level of benefit that you can access - currently you can get up to 60% of your gross income with state benefit taken off. So the message really should be look at getting yourself some income insurance cover to protect you and your families future lifestyle and speak to a consultant who can best advise you on these matters.
Written by E-Commerce Manager of Armchair Mortgages, Chris Roche. For more information on income insurance, mortgage protection or life assurance plans check out our site and give us a call for a cheap income protection insurance quote.