According to the Centers for Disease Control and Prevention, 61 million people in the United States live with some form of disability.
While many of them constitute birth defects, some were developed due to accidents at some point in life.
Amid the hustle and bustle, we get so engulfed that we don’t normally ponder what could happen if some turn of unfortunate events ends up stopping us from doing our work.
How would we pay our bills and manage our debts?
How long would we depend on our savings?
The income Protection Plan
“Hope for the best but prepare for the worst.”
An income protection plan pays you monthly benefits if you find yourself not fit enough to go to work due to injury or sickness. As a matter of fact, it can cover up to 85 percent of your pre-tax monthly income for a particular benefit period.
You can buy an income protection plan through an insurance company, a financial advisor, or an insurance broker.
While the majority of the insurance plans support a lump-sum payout when the policy matures, income protection facilitates you with monthly benefits during your inactivity.
Do you need an Income Protection Plan?
You might want to consider an income protection plan in case you:
- Are a self-employed person, as you won’t be covered on sick leaves
- Have dependents to take care of, and they rely on your earnings
- Will be required to pay your debts and mortgages when you won’t be earning
- Are a tradesperson, as your work is likely to entail extensive involvement of your body parts
If you ever find yourself stuck in any of the above-mentioned scenarios, income protection insurance is a way out that would enable you to rest assured that you will be financially covered in the unforeseen circumstances, and there won’t be hindrances in the flow of your life.
The types of plans
Majority of the Income Protection Plans encompass the two types of policies:
Indemnity Value Policy
This plan will give you a percentage of your monthly salary. This is a kind of a plan that compliments those people who have rather stable monthly incomes. However, it should be noted that even though it is a cheap solution, you might end up getting lower monthly amounts if your salary experiences a reduction at the time you make a claim.
Agreed Value Policy
Albeit expensive of the two, this is a more reliable option to go for since you settle on a fixed amount with your insurance provider. This plan makes sure that your benefit stays unaffected from the unanticipated fluctuations in your salary.
Making a Claim:
When you make a claim, you will be required to satisfy your insurer that your case is valid— you are sick or physically disabled and cannot work.
Consequently, your insurer is likely to put the degree of your disability under three of the following categories of coverage plans that pay you monthly benefits.
- Duties-based disability: This most-common type of disability allows you to be facilitated with the full-benefit amount if you are no longer eligible to perform the duties of your occupation.
- Hour-based disability: Under this category, you would be able to claim full income protection if you are not able to perform a minimum of 10 hours of duty. In contrast, if you are left disabled by some accident but you can still manage to work more than 10 hours somehow, you would be eligible for a partial benefit.
- Income-based disability: If your injury or disability has led to a decrease in your income by 20 percent or more, your policy might relate to this category.
What information can you expect to provide?
At the time of applying
Once you make your mind on getting an income protection plan, you will be required to provide your insurer with certain information. This is a critical stage as it will strongly dictate the type of plan you could be recommended by the company, so make sure to keep everything transparent at this stage.
Some of the information that you could be expected to provide with include:
- Age
- Type of job
- Income Level
- Medical history
- Hobbies
- Habits (for instance, smoking)
The insurer will then assess the information you provide and offer you plans that correspond to it. Besides, you might be required to agree to certain terms and conditions of the income protection facilitators.
At the time of Claiming
Alternatively, you will be required to support your claim with the relevant documents. These may include:
- Your policy details
- Medal reports and complete medical history
- Death certificate, If the policy associates with a decedent
- Current income status (in the form of salary slips or bank statement)
- Tax returns
The insurer might then ask your permission to contact your doctor to reinforce your case. Additionally, you could be required to appear in an independent medical examination that would be carried out by the insurance company.
How long is the waiting period?
Once you have made a claim, you will be required to wait for a particular duration before you start getting your monthly benefits.
In most of the circumstance, after the assessment of your documents, you could expect your benefits within:
Two months— if you make an income-related claim.
Six months—if you make a claim in some other category.
However, it should be noted that some insurers do not live up to their standard and end up delaying your waiting period for up to two years. This should be factored in during your research to get the best insurance provider.
Final Word
While everything we have stated so far serves as general guidelines, it is reminded that income protection plans could come with a unique set of characteristics, terms, and conditions. Therefore, it is strongly advised to examine all the plans thoroughly before going for any particular one.
Moreover, whatever plan you end up going for, stay in touch with the customer representatives to get your concerns addressed.
If you have any question in your mind, feel free to share them with us in the comment section.
