Many of us would struggle to make ends meet if we lost our jobs due to illness or an accident. Income protection is a long-term insurance policy that ensures you have a consistent income until you retire or return to work. Learn how it works, when you’ll need it, and what to consider before purchasing it. Click here to invest in income protection insurance plan Malaysia.
How does income protection insurance work?
Insurance for income protection:
- If you are unable to work due to illness or an accident, you will receive regular payments that will replace a portion of your income.
- pays out until you can resume working, or until you retire, die, or reach the end of the policy term, whichever comes first.
- If you are unable to work, you will typically receive between 50% and 65% of your income.
- covers the majority of illnesses that render you unable to work – either temporarily or permanently (depending on the type of policy and its definition of incapacity)
- can be claimed as many times as necessary while the policy is in effect.
Before payments begin, there is frequently an agreed-upon waiting period (‘deferred’). The most common waiting periods are four, thirteen, twenty-six weeks, and one year. The lower the monthly premiums, the longer you wait.
It is not the same as critical illness insurance, which pays out a lump sum if you are diagnosed with a specific serious illness.
When do you need an income protection insurance plan?
When we are unable to work due to illness or an accident, we may assume that our employers will continue to pay us. In reality, employees are usually transferred to Statutory Sick Pay after six months.
Few employers provide sick leave to their employees for more than a year. Check with your employer to see what they will do if you are out sick. Depending on your level of savings, losing an income can quickly leave you unable to pay essential household bills like mortgage/rent and utilities. It’s especially difficult if you’re self-employed and don’t have sick leave to fall back on.
Who doesn’t need an income protection insurance plan?
You may not require income protection insurance if you meet the following criteria:
You could survive on sick pay if, for example, you have an employee benefits package that provides you with an income for 12 months or more; you could survive on government benefits if they are sufficient to cover all of your outgoings; and you have enough savings to support yourself. Be aware that your savings may need to last a long time; you may be able to retire early if your partner or family supports you; for example, if your partner has enough income to cover everything you both require.
How much does income protection insurance cost?
The amount of premiums you pay each month will vary depending on the policy and your circumstances.
Income protection insurance policies provide coverage for a wide range of illnesses, conditions, and situations. As a result, it’s critical to compare what different insurers have to offer.
The cost is influenced by:
your age, occupation, whether you smoke or have smoked, the percentage of your income you’d like to cover the waiting (or deferred’) period until the policy pays out the range of illnesses and injuries covered health – your current health, weight, and family medical history