None of us know what the future holds. Therefore, taking precautions to prepare for the unknown is an essential part of life. Insurance is one of those crucial ways of preparing for the unpredictable. There are numerous types of insurance available, depending on your needs. Long term income protection is a form of insurance that serves to protect you if you are diagnosed with a debilitating injury or illness. The purpose of the insurance is to provide you with financial aid to help maintain a reasonable lifestyle.
Long term income protection insurance provides financial benefits every month until retirement in case you are unable to work, covering a maximum of 65% of annual gross income. Before purchasing any form of insurance, you should always weigh the advantages of disadvantages of the decision. Researching all of the aspects of the different insurance policies will help you to determine if the policy is right for you.
Advantages of Long Term Income Protection Insurance
If you are diagnosed with a serious illness or sustain an injury that prevents you from working, long term income protection insurance provides monthly income to ensure that bills can still be paid and financial obligations can be met. This form of insurance can extend until you are ready to go back to work or, at most, until you are of retirement age.
The majority of the policies are tax deductible and flexible, meaning that you can choose when you will receive your payments. The typical waiting period is between 90 to 180 days. This provides you and your family with the time necessary to make any necessary adjustments in your lifestyle and other insurance policies.
The benefits received can be a maximum of 65% of your previous annual income. Some policies will also provide you with other benefits including retirement protection and temporary accident coverage. Retirement protection will pay you a maximum of 10% of your previous base salary once you retire and temporary accident coverage will provide financial compensation during the period in which you are waiting for your long term income protection insurance to kick in.
Disadvantages of Long Term Income Protection Insurance
Because insurance is largely related to risk, you will doubtless be paying premiums each month even if you are not receiving benefits. While it is highly useful if you sustain a serious injury, you will be paying monthly premiums even if you never have to use it. Therefore, you need to carefully balance the features you need with the amount you can reasonably afford.
Another item to consider is that insurance is always underwritten which means that you will need to be evaluated by a series of tests before the insurance provider will grant you a policy. And, if you are determined to be qualified, it is quite likely that you will be required to pay higher premiums than expected if the provider sees you as a higher risk. Long term income protection insurance can vary greatly from one policy to another. Oftentimes, what you expect to receive from a pay out can even differ from what actually occurs.
As with any major financial decision in life, weighing the pros and cons of any insurance policy you purchase is crucial to ensure a positive cost to coverage ratio. If you are unsure of what you should be looking for, consider meeting with a financial adviser to discuss your needs and expectations.