Do I Need Income Protection Insurance?

What is Your Most Important Asset in Life?


What is your biggest asset? Your property? Your car? No!

It is your ability to earn an income. The truth is your financial success depends on it. For instance, a 30-year-old making $60,000 per annum (and growing at an annual rate of 7% a year) could expect to make approximately $8 million when he retires at age 65. A 40-year-old making $80,000 with a similar earnings growth could earn $5 million when he retires.

While many people insure their property and car against damage and loss, few protect themselves against an inability to work and the subsequent loss of income. The main reason for this is that the majority of people do not think they might lose their ability to work.
 

Income Protection Insurance Benefits


Studies reveal that over 2 out of 5 people suffer disease or injury more than 6 months throughout their working life and 1 in every 100 people will probably suffer a major disability each year. With no sufficient coverage, an extended absence of income might have a disastrous impact on a family's standard of living; it might cause a severe depletion of their retirement savings.

Have you ever thought of what would arise in the event you lost your ability to generate an income? Who would repay what you owe and carry on with your savings plan?

Among the benefits of income protection insurance, the most important is to protect a family's earnings position and recover the income if the breadwinner loses his or her ability to work for a period of time due to an accident or illness.

Some companies, generally government or major corporations, provide limited disability insurance benefits in their employment package. This is where the employees can get a free income protection insurance. However, many others do not offer coverage to their workers.

Self-employed individuals with a high standard of living especially need this type of insurance. They are usually in stress related jobs and oftentimes have high interest commitments on mortgage loans, and a high standard of living to keep.
 

With Financial Success, Do I Still Need Income Protection Insurance?


James had been a top commercial lawyer, thriving in the fast moving pace of life and the opulence that his achievement allowed; that was before the accident that broke his spine and paralyzed him from the neck down.

There after he was confined to a wheelchair and needed full-time nursing care. Luckily he had income protection insurance, so his family members could afford the treatment and attention that James needed. They could also continue to stay in their family home and fulfill the commitments on the home loan as well as the maintenance.

Without having that protection James and his loved ones could have lost all their wealth and ultimately would have turned into state beneficiaries.

Obviously somebody who has already attained financial success has definitely no need for income protection insurance. Like life insurance, it just fills a gap while waiting to attain financial success.

There are generally two types of income protection insurance: guaranteed renewable and cancellable. Although both insure against a similar event, they are pretty different anyway.

Guaranteed renewable income protection insurance is relevant to people who need protection for 2 or 5 years or until retirement. Should you fall sick with a permanent disability then the insurer cannot stop the policy.

On the flip side, cancellable income protection coverage is a year-to-year insurance that is the same as the insurance for your car. At the point of annual renewal time the insurance provider has the right not to renew your insurance or to exclude specific conditions, such as the specific condition that the insured may be encountering.
 

To answer the question of "Do I Need Income Protection Insurance?" the acid test is this: What would happen to your family if the breadwinner was not able to work because of an accident or illness? Who would settle the debts? If sweat is starting to form on your forehead then income protection insurance is for you.

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