Income Protection Planning
Income Protection should be seen as the foundation for good financial planning.
If you lose your income because you are unable to work due to sickness or accident then your financial planning is in danger of falling apart. When considering your protection requirements this type of plan should not be overlooked.
· You may protect up to 2/3 of your pre disability earnings and any payments received are tax free.
· A variety of deferred periods are available and as a rule of thumb the longer the deferred period the cheaper the premium will be.
· When you start claiming on the plan payment will continue to be made until you return to work or, in the event of a long term illness, till retirement.
· There are no restrictions on the number of claims that can be made.
· Cover can be set up on an own occupation or any occupation basis. It is generally recommended that you choose own occupation as it is harder to claim under an any occupation definition.
· Premiums can be guaranteed or reviewable. Although guaranteed premiums will be more expensive at the outset they do provide peace of mind that no unforeseen increases will be applied in the future.
· Benefits can be index linked to help keep up with rising income over the years.
How much cover do I need?
As a guide the maximum cover available from this type of plan is around 65% of your Gross annual earnings although some providers may offer less than this.
The main considerations you should have are:
Protecting your income in the event of illness should be regarded as the first stage of any financial plan as invariably it is your income that supports most other areas of financial planning.