Income protection insurance will cover an individual if they become incapacitated and can not work. This insurance may offer monthly payments while the insured is off work. It can also offer protection against sickness, accidents or unemployment.
These policies typically offer protection in three situations. First, you can purchase a policy that will protect against sickness and accident only. For a bit more, you can purchase a policy against unemployment only or you can purchase a comprehensive policy that protects you against all three situations.
These policies typically don’t start paying until the insured has been out of work at least six months. Once this waiting period is over, the policies may cover up to 80 percent of the insured’s salary. The policy will continue paying until the insured returns to work, reaches retirement age or dies.
How long and how much a policy pays will depend on the terms and conditions of the policy. If an employee is able to return to work at reduced hours or in a different position for less pay, the policy will usually take this into account and adjust payments.
Income protection policies are primarily offered in the United Kingdom, Australia, New Zealand, Ireland, and South Africa. There are two types of policies, group income protection, and individual income protection.
Group income protection is available through the employer and will replace an employee’s income if they can’t work due to injury or illness. This type of income protection insurance is available as part of an employee benefits package.
Individual income protection insurance may be purchased through private insurance brokers. It is also sold by some independent financial advisers.
Group income protection policies will generally cover pre-existing conditions while many individual income policies do not. Group policies also tend to pay more than individual income policies.