income protection
Insuring your income
Our lives are full of uncertainties. Income protection can provide a
plan for financial security or at least help to manage some of the low
points. It is possible for you to receive an income even when illness
or injury, prevent you from working long term. Allowing you to get on
with your life, safe in the knowledge you and your family are protected.
It is true that the State provides a safety net. That is all, however.
It will not maintain your standard of living at their present levels
for long.
Think about it, most people insure their lives, their
homes and their future retirement but not their lifestyle – provide
for the future.
Your Income Protection Insurance Plan insures a percentage of your annual
income. Normally this is 50% - 65% of your employment income depending
on the Insurance Company. Payments are made free of personal income
tax.
- If you are self employed you income is your trading profit for
the last tax year.
- If you are employed, your insurable income is your annual salary
plus benefits in kind.
- If you are a director of a close company, the company take out
the plan and insure part of your dividend payments, if these have
been paid on a regular basis and company pension contributions.
Deferred Payments
There is a waiting period before payments can start in the event of
a claim. Your choice is normally 4,13, 26 or 52 weeks. This ‘deferred
period’ is the time you think you can meet your income needs from
other sources such as savings. The longer the period – the lower
your monthly premium cost will be.
Guaranteed or Reviewable Premiums
Your income protection plan can also be set up with either guaranteed
premiums or reviewable premiums. If your monthly premium is guaranteed,
it will not increase during the period of the plan. If you choose reviewable
premiums then these are reviewed by the insurance company, usually every
5 years.
Level or Indexed Premiums
Your plan can be set up to provide either a level monthly income or
an increasing income (indexed). With an indexed plan the premiums you
will pay will increase each year. This will be based on either the Retail
Price Index or by a fixed percentage, usually 5%.
Length of the Plan
Your plan will run for a specified number of years which you will choose.
Normally, this would be to your planned retirement age. However, you
can choose shorter periods.
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