While most of us are aware of how much we make each month in wages and salaries, have you ever taken time to calculate how much you spend each month on household expenses?
Unpleasantly, you might be surprised by the sum of all the outgoings and payments when you calculate them.
There are the mortgage payment, rent for accommodation, council taxes or local rates and credit card payments. Loan debt repayments include electricity bills, fuel bills and water rates. Phone bills and mobile payment plans can be negotiated. Pension and savings obligations, insurance payments, and hire-purchase repayments. Before you can eat, drink, or put your shoes on, there are many other things.
Children and dependents will need to be provided with new uniforms, Johnny’s football fee and Victoria’s piano or ballet lessons. You may be able to save some money for a rainy or holiday, if you’re lucky.
After you have done all the math, ask yourself how you will pay for this if you get hurt or miss work due to a long illness.
Income insurance, also known as income protection insurance, is a type insurance that protects and covers all your monthly expenses while you are disabled.
Workers can receive a monthly benefit for a small monthly premium. This will typically cover fifty to sixty percent of their monthly income in the event that they are disabled or have an accident.
There are two types of income insurance. Each type is different and each one targets different workers.
General Income protection policies consider your occupation, past health records, and lifestyle factors such as smoking status. These policies offer a monthly benefit that is often inflation-indexed linked and are priced at a fixed amount. The policy can be cancelled or continued for an additional term.
The general income protection policies also cover long periods, up to retirement age, or as long as you are unable to work. This type of income insurance was formerly known as permanent health coverage due to its wide range of coverage.
Alternately, you can choose an age-related income policy. This type of coverage offers the same benefits and protection as a general policy. However, rates are determined based on age. Factors such as occupation, health, and lifestyle are not considered when calculating monthly premiums. These policies offer benefit payments only for a period of one to two years.
Each type of policy comes with its own merits and costs. A policy that is age-related will typically be less expensive for those younger than 50, who smoke, and people in high-risk jobs. However, the downside to this is that premiums increase each year. This is usually offset by an increase in personal wealth with age.
A general income policy may be more affordable for workers who have low-risk jobs such as those in office work or professional services. It offers greater flexibility and coverage.
Each type of income insurance offers what is called a deferred claims period or excess period. This is the time period between the moment a worker goes off work and when they want the coverage to begin payment.
The statutory four weeks employer sick pay can be deferred. Employers will often offer full pay for up to six months following a worker’s accident or illness. However, good employers may offer half-pay for six additional months. Deferred periods allow income insurance payments to begin when resources are exhausted. A long deferred claim period of six months or more can reduce the monthly premium by half.