5 Things You Didn’t Know About Income Protection Insurance

Posted on Monday 22 August 2011

Income protection insurance is a vitally important cover, especially if you are self employed. It is insurance you will need to take out in order to protect yourself and your family against a loss of income should you become ill or injured and unable to work for any extended period. Such insurance will normally give you a monthly income that equates to 75 percent of your average earnings. It will ensure these payments are continued until you are able to return to work, or if you incapacity is prolonged, the payments will continue until you reach the age of 65 years, depending on what type of work you were originally employed to do.

Income protection insurance is an insurance which will allow you to continue to pay off your home, if you have a mortgage, or keep paying the rent if you are renting accommodation.  It will also guarantee that you are able to continue feeding yourself and your family and that you can keep up with your day to day living expenses during times of enforced inactivity.

Income protection insurance will keep you financially independent and allow you to hold your head high in times of adversity. Without such assistance you could end up becoming destitute and living on handouts from family, friends, or even charitable institutions. However, there remains some aspects of income protection insurance that you may not be aware of, such as the following:

  • The start and finish of your cover.  Cover will normally begin on the same day that you start your premium payments. Some policies will allow a cover note to be issued whereby your cover will start from the day you accepted the insurance by signing the contract. In this case you will be given a period of time, usually between 14 or 30 days to make your first payment.
  • Flexibility of occupational changes. You can obtain income protection insurance that will continue even when you change your occupation from what could be considered a ‘safe’ environment to a not so safe environment. Some insurance companies will place restrictions on your health, pastime activities, or the type of job you are involved in. Others will give you certainty in this area and continue with your cover under all circumstances because it would be too late to worry about such things as your parachute fails to open in your new job as a skydiving instructor.
  • Cover in all countries. People are not as restricted to remaining in the one country throughout their working life as they once were. If you feel you may be traveling to another country at some stage you will want to make certain that your income protection insurance continues to give you protection as you travel. Many policies will automatically give you this protection no matter where you may be in the world, others unfortunately may not. It will be up to you to make sure that the cover you have will keep you covered worldwide 24 hours a day, seven days a week.
  • Drug taking and suicide attempts. Income protection insurance policies usually have a death benefit attached to them and as such, self inflicted acts, such as intentional drug taking or suicide are excluded when allowing benefits to be paid. Some policies will have these acts excluded on a permanent basis while others may only have them restricted for a prescribed period.
  • Breaking a leg. You will be excluded from receiving any benefit from your income protection insurance if you are found to have caused an injury to yourself so that you can receive payments, such as voluntarily breaking a leg or ingesting poison. To be eligible for payment all accidents or illnesses that have affected your ability to work must be the result of an occurrence beyond your control.

Other finer points concerning income protection insurance to keep in mind is that this type of insurance is not intended to protect you from loss when being made redundant or simply losing your job. Your inability to be able to work must be the result of an injury or illness. Another matter to keep in mind is that you will still have to pay tax on whatever amount of income protection insurance benefit you receive.  It is not tax free and will be regarded by the tax man as income earned in the normal way. You will also have to be in employment that takes at least 20 hours of your time a week. Anything less than 20 hours and you will be paying your premium for nothing. If your working hours have been reduced to below 20 hours for any reason you should bring the matter up with your insurer to see where you stand.

Income protection insurance is an important part of your insurance portfolio if you are self employed, operate your own small business, or are a contractor. Although you will not get the full amount that you are accustomed to receiving as an income, you will be able to keep paying your way in an independent manner.

Kristy Ramirez writes for Life Insurance Finder where she helps people to compare life insurance quotes and select the best policy to meet their needs at the best possible price.

savvy @ 8:00 AM
Filed under: General Finances
How Do I Pay Off My Debt the Fastest?

Posted on Monday 1 August 2011

About the Author: Jeffry Evans is a leader in personal finance and real estate marketing, and has a focus on helping people make and save more money.

First of all, owing money is kind of like dragging around a ball and chain. It is constantly keeping you imprisoned, and holding you back from what you truly want to do. So how do you get debt free in the shortest amount of time?

Option 1: Save as much as you can each month, and divide that up evenly across your debts.

So in this example, you do a really good job of being frugal, and saving extra money each month. You are excited, and you tackle your 2 outstanding debts. You’ve managed to save $500 per month that you can use to pay off your debts. Your first debt is a Visa credit card, which you owe $3,000 on with a 14% interest rate. Your second debt is Macy’s card that you owe $2,000 on at 19.99% interest.

So you divide the payment equally, and put $250 on each card each month. If you work through the math, you’ll have the Macy’s card paid off in about 9 months, and after it’s paid off, if you put all of the $500 towards the Visa card, you finish paying it off about 2 months later. That’s a total of about 11 months to pay off your debt. Not bad.

Option 2: Put all of the money towards paying of the highest interest rate credit card first.

Let’s take the same scenario. In this case, you will make the minimum payment to the Visa card, and take the remaining money and put it all on the Macy’s card. Minimum payments are generally about 2% of the balance, so that means you’ll pay $60 per month to the Visa card, and $440 per month to the Macy’s card.

In this case, when you work through the math, you’ll have paid off the Macy’s card in about 5 months. After it’s paid off, if you put all of the $500 towards paying off the Visa card, you’ll have it paid in about 4 months, for a total of about 9 months to be debt free.

Now think about that for just a minute. With option 1, you are paying $500 per month for 11 months to get your debt paid off. With option 2, you are paying the same $500 per month, but it only takes 9 months to get debt free. That means you save about 2 months and $1,000 using option 2.

Isn’t that incredible?

And you did it all without spending one extra dime. That’s the power of interest, and how you can use it to your advantage.

So let me urge you, if you have debts, and you want to pay them off in the fastest and least expensive way, focus on the highest interest rate debt you have, pay it off completely while making minimum payments on your other debts, then pay off the next highest interest rate debt, and so on. If you do it this way, I guarantee you will be debt free in less time, and have more money in your pocket.

savvy @ 8:00 AM
Filed under: General Finances