Rising unemployment leads many to consider benefits of income protection
18th November 2011
Income protection is typically designed to safeguard your finances in case of unemployment, sickness or in the event of an accident which prevents you from working.
It ensures that any outstanding payments on loans or credit cards are taken care of if you are no longer able to earn.
One of the benefits of income protection is that you will be financially protected in terms of your outgoing loans or credit debts in case of redundancy. The latest debt statistics show that 1,644 people are made redundant on a daily basis in the UK.
According to Credit Action, 867,000 people had been officially unemployed for more than 12 months at the end of October.With next week’s official unemployment figures expected to rise, now could be a good time to consider applying for income protection.
Do your homework
Over the last year there has been some bad press surrounding income protection. This is down to the way it was sold by many high street banks and lenders. Lenders who mis-sold payment protection insurance, which is sometimes known as income protection insurance, have been heavily criticised and fined by the Financial Services Authority.
In the majority of cases though, income protection and mortgage payment protection are useful financial products. However, if you are considering taking out an insurance policy, be sure to check your eligibility for it before committing to anything.
Do you really need it?
It is important to note that income protection is a short term insurance policy of 12 months, rather than a long-term policy. Typically, it is only available for those aged over 18 and under the statutory retirement age. To be eligible for the majority of policies you must be working full time or at least 16 hours a week. If you are a student or a pensioner, taking out this type of insurance would be invalid.
There is also a wide scope of requirements and cover for those who are self-employed.
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