Why Parents Need Income Protection Insurance

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Financial stability is a key concern for parents, considering how unpredictable life is. Needless to say, an income is necessary when it comes to daily needs, childcare, savings, long-term goals, monthly bills, etc. However, unexpected events like illnesses or accidents can negatively affect one’s cash stream. As a parent, that leaves you and your family exposed to financial hardship. This is where income protection insurance comes in.  

In this article, you’ll learn more about this type of insurance. You’ll get to understand what it is, how it works, and the many advantages it provides for parents and families. Besides that, you’ll also find some factors to consider when choosing a policy.    

What Is Income Protection Insurance?  

Income protection insurance can also be referred to as disability income insurance or income replacement insurance. It’s a type of cover created to protect your income if you become unable to work. That may be as a result of an illness or injury.   

In case of these circumstances, you might be unable to obtain a steady income from your normal employment or business. In this case, this insurance cover acts as a safety net for your finances by supplying you with a regular income.  

Exactly How Does It Work?  

Here’s how income protection insurance works:  

Premium Amount  

Typically, the insurer receives regular premium payments from you as a policyholder. In this case, your age, career, health, and the level of coverage you select are some of the factors that determine the cost of your premium.  

Medical Evaluation  

A medical evaluation may be necessary to be eligible for benefits. This helps to determine the severity of your disability and your inability to work.  

Waiting Period  

When you file a claim, there’s usually a waiting period before you start receiving benefit payments. Depending on your policy, this waiting period could be anywhere from a few days to months. In most cases, the longer the waiting period, the lower the premium payment.  

Coverage Period   

The coverage period depends on one’s policy. Some provide benefits until you can find employment or return to work again. On the other hand, others have a predetermined benefit period (e.g. two years, five years, until your retirement age, or until the end of your policy term).  

Benefit Payment  

Once the waiting period has passed, you start receiving a consistent income. This may be between 50% – 70% of what you previously earned before your illness or injury.  

What Are The Advantages? 

Everyone needs income protection insurance coverage. However, if you can survive on your savings, have a partner with a good income, or can live on government benefits, then you may be good. Also, if you can get your pension from early retirement or if your sickness allowance or sick pay will be enough for you, then you may not need this coverage.   

Otherwise, here are some of the reasons to get income protection insurance as soon as possible:  

Maintaining Your Current Lifestyle  

Income protection insurance can help you and your family keep living the way you currently are despite your illness or injury. This means that you won’t need to take out a loan, ask friends and relatives for money, or rely on government assistance to get by.  

Tax Benefits  

In most countries, the premiums paid for income protection insurance are tax deductible. This may provide you with further financial relief.  

Protection For Self-Employed Persons

Self-employed people often don’t have the same safety nets that most employees have. This may be paid sick leave or disability insurance.  

Therefore, for such individuals, this cover can be extremely necessary. It can help them maintain their income and business operations while they’re unable to work.  

Peace of Mind  

Knowing you have a financial safety net in the event of an illness or injury can be calming. Without the stress of financial anxiety, you can concentrate on your recovery.  

Financial Stability Despite Your Inability To Work  

One of the main advantages of getting this cover is that you’re guaranteed financial stability despite your inability to work. This means that you’ll afford your daily living expenses, like your rent or mortgage, electricity bills, groceries, and other necessities.  

Inflation Protection   

Some policies allow you to index-link benefits to inflation. This helps ensure that the purchasing power of your benefit payments remains stable over time.  


Income protection insurance is flexible in terms of coverage. This means that your policy’s waiting period, benefit amount, and benefit period can be modified to suit your specific needs. Moreover, you can select a policy that complements your financial objectives and spending plan thanks to this customization.  

Works With Other Forms Of Insurance  

Income protection insurance can work with other insurance types you may have. This may be health or life insurance. While health insurance will help with medical expenses, income protection insurance will cover the income you would lose during the recovery period. Generally, these policies can work together to offer better financial protection.  

No Limitations  

There are no limitations on how an insured person can spend their benefit payments. You can use the money for daily living expenditures, medical bills, or recovery.  

Return-to-Work Assistance  

Some policies can offer vocational rehabilitation services to help you re-enter the workforce upon recovery. For instance, they may provide career counseling, job placement support, or training for new jobs.  

How To Choose The Right Income Protection Insurance   

To pick the best income protection insurance policy that suits your needs, it’s essential to do your research and compare the options available. Here’s how to choose the right one for you:  

Evaluate Your Needs  

It’s best to first consider your needs and your financial status. This means that you need to think about the amount you’d like to protect and your monthly expenses. This can help you identify the coverage amount you need.  

Understand Definitions  

Understand each policy’s definition of disability. It’s best to comprehend what constitutes a disability in your chosen coverage because different policies have different definitions.  

Consider Optional Riders  

Some policies offer optional riders that have extra coverage, such as inflation protection or rehabilitative benefits. Thus, consider whether the additional expense is worth it in your case.  

Compare Quotes  

Get and compare quotes from at least three insurers. Evaluate the waiting time, benefit period, and premium prices. Also, ask as many questions as you can before deciding on one insurance company.  

Seek Professional Advice  

Before making a final decision, consult an income protection insurance expert, a financial counselor, or an insurance agency. They’ll help you look through the choices available thoroughly. After that, they can help you identify what’s ideal for you.  

Final Thoughts  

Income protection insurance is a wise investment for parents who are employed or self-employed. In this article, you’ve learned what it really is, how it works, its benefits, and how to choose a policy that suits you.   

Life is unpredictable. You could get ill or get into an accident. So, if you haven’t got income protection insurance already, it’s high time you did. It’ll keep you and your family afloat in the most difficult times.   

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