8 Major Income Protection Myths Debunked - Consumers often misunderstand income protection. This article aims to clear up misconceptions and help you fully understand how income protection can help.
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Insurance products are not easy to understand, and income protection insurance is no exception. The plethora of mainstream publications and media reporting on consumer insurance companies' situational battles has led to consumers misunderstanding exactly what income protection is and what it offers.
Naturally, here we demystify eight major misconceptions about protection. This will help you distinguish between fact and fiction the next time you hear about income protection.
Myth 1: Unrewarding
If policyholders keep their monthly premiums up-to-date and provide truthful personal information from the start, income protection claims are paid out in most cases. In fact, over 90% of successful income protection claims were paid out by insurers in the UK last year.
If you are still unsure and want to check the rate of return for a specific insurance company, most insurance companies offer easily accessible claims statistics on their websites.
Myth 2: Expensive
This myth is purely subjective. If you're a smoker in a high-risk job and want a very high level of coverage, your premiums will, of course, be high. But in most cases, income protection cover is quite affordable, costing just 30p a day.
If you need a much lower quote for income protection insurance, consider buying through a broker with no commission or an extended deferral period (the amount of time between when a claim is filed and when the money is disbursed).
Premium rates are calculated based on age, health status, smoker or non-smoker, and occupation, so adopting a healthier lifestyle can also be beneficial if you want to significantly reduce your premium costs. Probably.
Myth 3: Waste of money
People can feel invincible when it comes to illness and injury, so it's easy to see how this kind of myth gets circulated, but ask anyone who has used an income protection policy. Please see.
They will be the first to refute this idea. If you are unable to work due to illness or injury, the monthly installments provided by Income Security will be invaluable, and your bills, loan repayments and other expenses will be invaluable. It gives me a sense of security that I can keep covering while I'm away from work.
Myth 4: There is no need if you have benefits
Statutory sickness and other benefits tend to pay less than £400 a month and cannot in most cases cover rent or a mortgage. However, the income protection policy pays you up to 75% of your normal income to cover your living expenses comfortably.
Some employers offer more comprehensive benefits than statutory sick pay. So it is important to check if this is the case. This is because it may mean that you can extend the deferral period and lower your premium.
Fifth misconception: the same PPI
Although they may look similar, income protection and Payment Protection Insurance (PPI) are not the same product. PPI guarantees certain loan payments, while Income Protection is designed to cover a portion of your income.
If you are unable to pay your mortgage due to illness, a PPI can help, but what about other unavoidable expenses? This is where income security comes into play.
Myth 6: You don't need it if you have critical illness insurance
Critical illness insurance is important, but unlike income protection, it doesn't pay out if you're unable to work because of an injury or mild illness. For this reason, it may be worth considering income protection in conjunction with critical illness coverage.
Myth 7: Self-employment is not for you
Self-employed persons are entitled to income protection insurance, but they must provide the relevant documentation. If you're self-employed, your income can be fluctuating, so it's a good idea to check your insurance regularly to make sure you're covering the amount you need.
Myth 8: Applying takes too long
This may have been true in the days of online and telephone brokers, but thanks to easy-to-use websites, it's never been easier to find, compare, and purchase income protection policies.