Some are just realising that your ability to earn is your greatest asset, and right now that ability is under enormous pressure. There is confusion about what type of insurance protects your income if you were sick or injured verses redundancy.
While most income protection policies cover you for COVID-19 sickness, you need to check the specific details of your policy as you may recover before any payments could begin. It will not cover healthy people who are unable to work due to lock down, self-isolation or if you lose your job through redundancy
– Income protection insurance will pay out if you are off work because of illness or accident. It does not cover people because they have been made redundant.
– You can apply for specific redundancy insurance but generally it does have many limitations and lengthy wait periods. It starts after a 6 month stand down and only pays 6 months of benefits.
– What is a wait period? This is the length of time between you becoming sick or injured and when you start receiving actual monthly benefits.
– Our common recommended wait period is 13 weeks as it saves approximately 40% on premiums.
– You should self insure with your rainy day fund to have enough available cash to see you through the wait period.
– The benefit period is the length of time your will receive your monthly benefits.
– The benefit period can be 2 years, 5 years or until the age of 65 or 70 – it depends on what option you selected.
Thank you to Tim Fairbrother from RIVAL Wealth for providing this article.
This information is of a general nature and this is not intended to be personalised financial advice.