Pros and Cons of Income Protection Insurance

Income protection is a measure taken to ensure you have some income even in the event that you are physically unable to work due to some illness or accident. Most employers do not support you for more than a year if you cannot work so having some extra coverage for the serious situations where you cannot recover during that time can make a huge difference in your life. It is one of the most important insurances for an employee to look for as it provides them with means of supporting themselves even when they cannot work.


Some employers offer income protection as a benefit so it’s good to check and see if it happened that you have had this type of insurance and weren’t aware of it. Additionally, if you have some other policy insurances, check if they cover you for serious illness or injuries. If none of these is the case, you are free to apply for income protection insurance.

And, as every other thing in life, income protection also comes with its pros and cons.

The Upsides

1. Plans Available to Suit Everybody’s Needs

There are two main types of income protection insurance and what you choose should depend on your job, allocated budget, terms and conditions, personal needs and anything else that makes up your preferences. The first kind of insurance is for short-term and pays out for a period of one up to five years. The second one is the long-term protection, also formerly known as permanent health insurance. This one pays until a fixed age, the date when you are able to return to work or death, according to what you specify when applying for the policy. Keep in mind that, in order to encourage people to return to work, the amount paid is not the full salary but something ranging from 50% to 70% of it.

2. Monthly Benefits Available

Pays monthly benefits in the event the policyholder is unable to work because of incapacity caused by illness or injuries.

3. Policy Can Be Utilized the Way the Customer Wants

This can be advantageously utilized in any way the customer wishes, such as the mortgage payments, healthcare payments, domestic, college fees and more.

4. Several Extra Benefits That Automatically Apply

The extra benefits automatically incorporate a waiver of premium benefit: hospitalization, linked claims or proportionate benefit.

5.Suitable for Small Business Owners

Suitable for self employed whose prolonged illness or even injury can jeopardize the entire livelihood.

The Downsides

1. Pre-existing Illnesses Greatly Affects the Premiums

If you are working a high risk job, then long-term income protection insurance would be indicated as you are more susceptible to accidents that can prevent you from working for a long time. There are also other factors that have an influence on the final costs for your insurance. Some of these are gender, health condition, occupation risks, waiting period, the level of cover you choose and more.

2. Some Income Protection Insurances Have a Waiting Period Before Paying Out

This is because the employer may provide you with sick pay for a period and the insurance payment is meant to help you after that period ends. Keep in mind that the longer the waiting period, the lower your premiums will be. This obviously comes hand in hand with the period that the employer will support you when you are unable to work.

3. Some Policies Have Strange Exclusions

Depending on the insurance provider, some policies will also not allow you to do any other type of work than your own in order to pay you.


Look for the plans and providers that offer what you are looking for. As always, the Internet can prove to be the best solution but there are other ways to find what you need. You can ask for the help of an independent financial advisor in order to make the right choice. This will cost you but you can easily ask any questions you want and clarify every aspect of your personalized insurance so it is up to you if you are willing to pay for that.

Emmanuel Domingo is a renowned author who manages awesome websites on financial topics. For mroe information visit !


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