Income protection insurance is one of the most difficult products to understand. It’s not surprising that so many people don’t understand what income protection insurance is. There are so many key facts and stories about context-specific consumer-insurer battles.
Here are eight myths about income protection that have been debunked.
Myth 1 – It doesn’t pay
Claims are almost always paid out if the policyholder keeps up with their monthly premiums and gives truthful information. Insurance companies paid out more than 90% of successful claims last year in the UK. You can now easily access claim statistics from most insurance companies’ websites if you are still not convinced.
Myth 2 – It’s too costly
This myth is subjective. Your premiums would be higher if you were a smoker working in high-risk jobs and needed very high coverage. Income protection can be affordable for most people and cost as low as 30p per person. You can get significantly lower income protection insurance quotes by buying through a broker who is not paid commission. Also, you can extend your deferral period (the time between filing a claim and receiving the money). Your age, occupation, smoking status, and health are all factors that affect your premium rates. If you want to reduce the cost of premiums, it might be a good idea to live a healthier lifestyle.
Myth 3 – It’s a waste
People can feel invulnerable when it comes to injury and ill-health. Ask anyone who has used their income protection policy to disprove this idea. Income protection can be invaluable if you are unable to work because of illness or injury. It provides reassurance that bills, loans repayments and other expenses will continue to be paid while you’re not working.
Myth #4: You don’t need to if you get benefits
Statutory sick leave and other benefits typically pay less than PS400 per month. This is not enough to cover rent or mortgage payments. A policy that covers income would pay you up to 75% of your normal income. This will comfortably cover your daily living expenses.
Some employers offer a greater benefit than the statutory sick pay. It’s worth checking if this is available. This could mean that your deferral period may be extended, which could lower premiums.
Myth 5 – It’s the exact same as PPI
Although they sound very similar, income protection (PPI), and payment protection insurance(PPI) are different products. PPI covers a loan repayment only, while income protection protects a portion. PPI is available to help you pay your mortgage payments if you are unable due to illness. But what about the rest of your expenses? Here is where income protection comes into play.
Myth 6 – It’s not required if you have critical illnesses cover
While critical illness insurance is essential, unlike income protection it will not pay out if your injury or illness renders you unable to work. Income insurance is a good option to consider along with critical illness coverage. This would provide more coverage for a wide range of possible outcomes.
Myth 7 – It’s not for You if You’re Self-employed
Income protection insurance is available to self-employed workers. However, you must be prepared with the required documentation. You may have a higher income than if you were self-employed. Therefore, it is important to review your policy regularly to make sure you are covered for the money you need.
Myth 8 – It takes too much to apply
This may have been true back in the days when there was dial-up internet and telephone brokers. However, with user-friendly websites it’s now much easier to search for, compare, and purchase income protection policies.
