Starting your own business is a great milestone that comes with numerous benefits like more flexibility and freedom. The financial aspect – the possibility of earning more than you would as an employed worker – is also a motivator for starting one.
But as they say, in every seed of good there’s always a piece of bad; we’re talking about the many risks associated with running a business. For instance, if you were to fall sick or get injured, chances are your finances would suffer as you don’t have a sick pay to cushion you. This can be tough at first, but with good preparation, this is something you can manage.
As a future-oriented entrepreneur, you’ve probably taken out insurance to keep your customers and premises protected. But there’s one key element that most business owners forget – protecting their income. Curious how you can do this?
This post explains in detail everything you need to know about income protection insurance. Let’s dive straight in!
What is income protection insurance?
Income protection insurance is a type of life policy that guarantees to cover part of your income if you’re unable to work due to injury or illness. It comes in two forms; short-term and long-term income protection. We’ll explain the differences between the two to help you find a policy that suits your needs.
Short-term income protection
This type of income protection policy provides a monthly payout for up to two years at a time. Upon reaching the maximum claim period, you will have to return to work before becoming eligible to claim the benefits again. It’s comparatively cheaper than the long-term cover.
Long-term income protection
Long-term income protection insurance protects you against injury or illness, including mental illness. If you become unable to work, the policy may provide a regular, tax-free payout, covering 50-70% of your ordinary income. Most long-term policies have a minimum term of years and allow you to claim more than once, i.e., if you fall ill, recover, then become unwell again.
How does income protection insurance work?
For starters, income protection provides you with regular financial support to make up for the temporal income loss due to the inability to work. Besides, it’s also worth noting that the policy comes in different forms to cater to varying user needs and circumstances including:
Own occupation
It covers individuals who cannot work due to an illness or injury incurred in their specified profession.
Working tasks
Here, the policy will support you financially if you get injured or become too ill to perform basic living tasks such as lifting objects or walking.
But remember, you have to keep up with the monthly premium payments to become eligible for a claim if a risk insured occurs.
What are the benefits of income protection insurance?
Peace of mind
The thought of not being able to fend for your family due to illness or accident can be devastating. Luckily, income protection insurance helps to guarantee financial security regardless of what the future holds.
More flexibility
Nobody can tell when or for how long they’ll get injured or unwell. But that stops being a problem if you have income protection. It covers both long-term and short-term illnesses and accidents to give ample time for a full recovery.
Some policies offer additional benefits
Depending on your specific provider, you can get covered for more severe conditions like mental illness under the standard policy.
Enjoy benefits for extended periods
If you were to fall sick or stay injured for up to two years without recovering fully, the benefits will keep coming during that period.
How much does income protection insurance cost?
There’s no standard life insurance price for every individual. The monthly premiums payable depend on various factors such as age, occupation, lifestyle habits, current health, and more.
For instance, if you take out income protection at a young age, you’re likely to get charged less because your chances of getting diagnosed with a serious illness are lower. Likewise, the kind of job you do also has a bearing on the premiums payable; an office worker is likely to pay lower premiums than a construction site worker.
Conclusion
As we come to the end of our guide, we hope that you’ve realised the benefits of taking out income protection insurance if you run your business. This policy provides a financial safety net at your point of need by guaranteeing continual income flow should an illness or a crippling injury strike. You surely can’t afford to ignore this cover, can you?
