When and How to Insure Your Income

Insurance was invented because life is besotted with a lot of calamities, so we purchase life insurance, auto insurance, flood insurance and so on. However, most people don’t think about insuring the particular asset that allows them to pay for all those insurance policies. If misfortune strikes, a steady flow of income is the only way to sail through financially. Consider these basic things when it comes to insuring your income.

Disability Insurance

Various types of income insurance exist, disability insurance, as the most common one, provides a means for people to insure their income and secure their family assets if an emergency occurs. Most people erroneously believe that their family is protected in the event of an untimely death once they have purchased a life insurance policy. This may be true but if the income earner gets injured or sustains a long-term illness and has to stop work, life insurance might not do so much good.

Most financial advisors suggest that their clients obtain disability income protection insurance which can replace a part of a person’s income if the policyholder is unable to work due to an illness, disability or accident. Different types of policies are available (even though their terms may differ)

Usually, there is a waiting period before a disability policy begins but it will start paying out after any sick pay from the employer ends. The payouts may decrease over time but most will keep covering the policyholder during the period that the policyholder is incapacitated. Some payouts may continue until the expiration of the policy which may be at the end of a given period or when the person is old enough to retire.

Critical Illness

Disability income policies are not the same as critical illness insurance that pays a single lump-sum payment if the policyholder has a terminal disease. Short-term disability income protection insurance differs from a standard plan as it pays out a monthly sum in relation to a person’s income for just a period of time.

High Costs of Being Sick

An ailment tends to cost a fortune in terms of medical bills even if the patient has health insurance as there are other additional costs not covered by the insurance that can add up to be quite ridiculous. The various types of disability insurance can aid to cover those costs and help a family avoid going into bankruptcy in extreme cases.

Other insurance policies that can help safeguard a person’s income in difficult times are unemployment protection insurance (redundancy insurance); which protects the policyholder’s income if he loses his job by paying out a monthly sum for a particular period of time, it cover the portion of a person’s weekly salary not covered by government unemployment benefits, mortgage protection insurance aids policyholders by paying out the equivalent of their monthly mortgage payments when they are unable to work.

Conclusion

Financial stability is hardly guaranteed so purchasing income insurance is the best way to protect your assets in the event of any type of loss.