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The Benefits of Income Protection Insurance

The Benefits of Income Protection InsuranceIn the event you become sick or have an accident, income protection insurance is available to cover your expenses. No one anticipates an accident or illness during the course of their working years.

Yet, the scary truth is that many Americans are just a paycheck or two from financial disaster. Regardless, life happens at the most inconvenient time. It is at those times we wish we had some type of coverage.

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Although many businesses offer short term disability, many are left to chance when an accident or illness occurs. Short term benefits are intended for a term of under three months.

Although long term disability is also available to some, you do not have to depend on company benefits to obtain income protection insurance. Individuals can purchase policies independent of their jobs.

Income Protection Insurance: Disability Insurance

Some people prefer the phrase disability insurance over income protection insurance. They are basically the same thing except income protection insurance usually refers to private coverage versus disability benefits such as Social Security. SSDI is a federally funded program for those who have worked and made contributions to the system for at least five years with some exceptions.

If social security benefits are received in addition to income protection, most carriers will reduce your monthly benefit to offset the amount. Income protection insurance will cover between 65% and 85% of your income. A better determination can be done with an agent who is qualified to calculate the investment needed to receive the desired amount. In choosing a waiting period option, the longer you wait to receive benefits after the accident or illness occurs, the cheaper the plan becomes in relation to the duration of payments.

Who Needs Income Protection Insurance?

Many of those who seek income protection insurance are entrepreneurs or small business owners who have no employees. There are so many businesses nowadays that do not offer any insurance to their employees, that it opens a whole demographic of those in need. Anyone with a family, mortgage, and other expenses need coverage to replace primary income sources.

Pregnant women, without coverage at work, would benefit from having income protection in her last trimester and after baby’s birth.

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Income Protection Insurance for Groups

Group plans are available through most of the major carriers. There is an open enrollment period for employees who are usually held quarterly or bi-annually. The high risk factor is distributed among the number of employees which makes it less expensive and less intrusive. There are no health related tests performed as a prerequisite.

Therefore, those with preexisting conditions are eligible under the group policy, whereas under an individual policy they would probably pay higher premiums or be denied coverage.

Group policies do not have the guaranteed renew-ability and premium protection of an individual policy. The percentage of coverage can be less for groups also. The maximum income replacement is more like 60% to 70%.

Those in the low income bracket are assured of a guaranteed minimum, while those whose incomes are over $100,000 start to run into caps that reduce their benefit to less than 60% of their previous income.

How to Shop for Income Protection Insurance

Shopping for income protection insurance is something that only a qualified advisor can help you with to devise a customized plan. Many carriers have predesigned plans to cover groups and other blanket protection. Those that have a more complex financial picture, such as an entrepreneur, may benefit from a customized plan. However, you should start by getting disability coverage quotes so you know what to expect. Don’t go in blind.

Understanding provisions, inclusions and exclusions avoid surprises down the road. Policies with index links provide inflation increases, while a non cancellable policy protects against health reassessments that may justify an increase in premiums or denied coverage. What qualifies as taxable income also impacts benefits as well.

Income Protection Insurance Carriers

Most of the major insurance providers offer income protection insurance. The choice of a carrier should be based on the company’s ability to payout claims and their standing in the community and industry. Insurance carriers are given a ratings grade after factoring in their standing in these areas. A local carrier may also be to your advantage. Smaller online carriers warrant further investigation.

Where to Find Information on Income Protection Insurance

Most that have coverage through the job have no clue as to the performance of the carrier until they have an experience which places them in direct contact with them. Online help is available for those who want to research protection on their own. An online review of different carriers may be helpful.

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