Income Protection Insurance And What It Can Do For You

Securing the future and keeping all the options open to lead a carefree life is the dream of many people. However, who really is concerned about the lives of the ones toiling or not being able to earn their livelihood owing to some kind of illness or injury? What then happens to the man who goes jobless and therefore faces a short or long-term financial crisis? In such a state of unemployment income protection mainly provided in the United Kingdom insures a steady income for a specific period of time and rescues him from the miserable situation. This Income protection insurance is primarily designed to meet the economic needs of its’ policyholders under significant loss of income caused by some severe ailment or an accident. Income protection insurance, abbreviated as (IPI) was previously known to all by the name of Permanent health insurance or (PHI).

Requirements of Income Protection Insurance

Generally, not anybody and everybody gets the benefit of the salary protection insurance. Several factors influence the cover schemes provided by the insurance companies. The incapability of the disabled is defined on the basis of the below mentioned occupation types:

• Own Occupation: a policy holder is said to be incapacitated, if and only if he is unable work or get hold of a job caused by some serious illness or accident.
• Suited Occupation: In this case, the policy holder is termed incapacitated, if he fails to earn his salary from the type of job he is suited for due to some physical weaknesses or the occurrence of unfortunate events.
• Any Occupation: Any occupation refers to the state of being completely unable to perform any task owing to your illness or accident.

Types of income protection

The income protection insurance can be broadly classified under the two heads namely:

• Short Term Payment Protection: the short term payment protection takes care of your income for 12 or 14 months. It replaces all your money for the days on which you were incapable of working owing to some kind of sickness or forced unemployment.
• Long Term Payment Protection: the long term payment protection on the other hand is planned to provide you with the gross monthly salary till the time of your retirement, while you are unfit to earn your livelihood.

Benefits

It has been found that the benefits of an income protection insurance are more in number than any other insurance policy such as the accident insurance policy, sickness and personal accident policy etc. The benefits of the same can be summarized in the following manner:

• Protects your income against physical injury or a sudden accident.
• Availability of wide options for choosing the length of cover.
• Multiple claims can be made during the policy period if one is incapable of working.
• Benefits are paid on a weekly or monthly basis.
• They are absolutely tax free.
• No cancellation of policy renewals provided the policy holder continues paying the premiums on time.
• Availability of a waiver of premium option, which means that the benefits of the policy remain the same while the income protection income premiums aren’t needed.
• Benefits are offered after the recovery of health, retirement, passing of the date of contract and till death.

Limitations

A number of restrictions and limitations do affect the investor’s eligibility to apply for the salary protection insurance. These are:

• Policies hold well as long as one is unemployed owing to some physical injury or sickness only.
• Decrease in premium rates for the increase in deferred periods.
• No benefits payable for accidents or injuries from drug abuses, pregnancy, criminal offenses, wars, attempts of suicides.
• Limited benefits-decreased amount of regular payment to check moral weaknesses in people.
• Policy becomes invalid once the policy holder changes his occupation.
• Chances of tax relief may get reduced as the benefits paid are always non-taxable.

Compare Income protection insurance schemes

Comparing the different income protection insurance schemes is the vital task that one should choose to do before opting for this type of insurance. Investors may get fooled by the insurers’ quotations and conditions in the process. Hence, it is advisable to carefully compare the available schemes and then finalize on the insurer from whom you want to buy your income protection insurance. One can take further help from the income protection experts and advisors so as to get a detailed knowledge of the policy options and the rates available in the market. The amount of insurance premium must also be kept in the mind while investing in the type of income protection insurance scheme. It should not be an out of budget protection plan, rendering you helpless at times.  A convenient as well as a pocket friendly insurance plan must be wisely chosen after comparing the various protection schemes and quotes.

Compare Salary protection insurance quotes

Different insurance companies offer different insurance quotes. High, low and medium income protection rates are quoted by the brokers or insurance agents depending on the type of protection plan you choose to go for.  Sometimes, high rates of premium are charged for nominal insurance schemes. Thus, one has to be wise enough to get out of the clutches of the fraudulent insurers in the industry, avoid and correct the mistakes while choosing the insurance plans and go for the finest and perfect insurance deal finally.  If, you are not confident of your own decisions, then you may even consult and take opinion of the qualified professionals in grabbing the best and the cheapest income protection insurance quotes. One can even browse through the different income protection insurance websites in the internet and then decide to bag the best insurance quotes online. This has appeared quite beneficial and less chaotic to the people. Moreover, the free income protection insurance quotes online have made people think wisely and justly before purchasing the available insurance packages and thus have helped them to utilize the money in the right way.

Tags: new zealand, Insurance, income protection insurance, salary, salary protection insurance, unemployment

As pensions dwindle, ‘people to rely on savings’

With the amount being paid out by pension funds expected to drop the number of people having to dip in to their savings each month is likely to rise, the director of Churchouse Financial Planning has warned.

Keith Churchouse said that people who have taken the opportunity to build up savings are likely to “be reliant” on them once they retire.

“I do think that people are very unlikely to be reliant on pensions in retirement,” Mr Churchouse commented.

According to the Fidelity Retirement Index, a worker who retires now on the average UK income can expect less than £30 a day from their pension payout.

The organisation says that someone currently earning the national average salary of £22,900 who is about to retire will have an annual income of £9,618 from their pension, which is about £185 a week.

Mr Churchouse said he does not think “there’s any doubt” people will rely more on their savings in old age.

Tags: retirement index, annual income, Churchouse Financial Planning, salary, Labor, Business Finance, employment, someone

Start saving if you are under forty

According to a recent report younger consumers in their twenties and thirties have become so reliant on credit that many are simply spending all of their money on frivolous spending or repaying debt rather than putting money away for their future.

Twenty and thirty-somethings are now being urged to put money aside into savings or investment for their future to reduce the risk of being left without an adequate retirement fund when they reach retirement age.

The government’s state pension has declined over the years, and with increased life expectancy and higher living costs to also consider younger consumers now need to start thinking about their future in terms of how they will manage financially.

Historically, most people in their twenties and thirties tend not to think much about mortgage provisions, but this has become an increasingly important consideration for the younger generation if they wish to enjoy a certain standard of living when they come to retirement age.

One official advised younger consumers to start putting money into savings or an investment fund as early on as possible to ensure that they had a tidy sum available for when they retire. Increased life expectancy means that consumers must put aside more money to cover the cost of living after retirement, and this has made it even more important for younger consumers to start putting money aside as early as possible.

Consumers in their twenties and thirties are advised to cut back on their frivolous spending, try and avoid getting into further debt, and start putting money aside on a regular basis. Many younger people are wasting a small chunk of their income each month on repayment of interest on their debts, all of which could be used towards saving for the future.

Tom Smith
5th November 2007

Tags: interest, retirement, earnings, salary, saving, future, Banking

Consumers advised to inflate earnings to get mortgage

A recent report has revealed that many consumers in the UK are being advised to lie about their earnings on mortgage applications forms in order to enable them to get a larger loan – one that many cannot realistically afford based on their actual earning as opposed to the inflated amount that they state they earn.

This advice is being given to those that self certify, which means that they state their own income and this is often not checked out or verified by the lender.

A number of industry professionals, such as brokers and advisers, have been found to have been advising consumers to put down that they earn far more than they actually do, and this means that they get a larger mortgage loan. However, it also means that the repayments are far higher, as the lender will have based affordability on the earnings reported on the application form.

One man told investigators that he had managed to get a mortgage for eight times his salary by stating that he earned £50,000 per year as advised to do so by his financial adviser – he was actually earning half of that amount. As a result, stated the consumers, he was left repaying a huge mortgage that takes up the vast majority of his income, and has even had to deal with the threat of repossession through difficulties with affordability.

Campaigners are now urging financial regulators to look into this practice and put a stop to it, as it could add to the problems that have spread from the sub-prime market in the United States, leaving many of those in the sub-prime sector unable to cope with their repayments. The practice came to light following an investigation conducted by the BBC.

Tom Smith
24th October 2007

Tags: extra, mortgage, income, loan, increase, huge

Make sure you have savings for an emergency

An independent financial advisor is urging consumers in the UK to make sure that they have some savings put aside to serve as a ‘financial cushion’, which can then be used in the case of emergencies.

The advisor, from Christie Scott, states that consumers should always have at least three months worth of wages put aside in savings to fall back on should the need arise. This is particularly important for the self employed, who may find that income for some months is far lower than for others, and therefore may need extra money to subsidise their income now and again.

The firm Christie Scott has pointed out that in order to ensure that there is money in the savings account for emergencies consumers will not necessarily have to dramatically cut down on their social life and spending. Simply making some basic cutbacks and reassessing expenditure could help to top up any savings in order to try and get the balance up to three months worth of salary. Consumers are urged to look through their monthly income and outgoings in order to try and direct some extra cash into savings each month.

The financial advisor stated that in some cases people believed that savings was only worth it if interest rates were high, but this was not necessarily the case.

She stated: “More people may be inclined to save when interest rates are higher. When rates are low some people see little point. Most don’t understand the concept of compound interest – meaning that even low interest rates added steadily over time will make a difference.”

Research has shown that in the second quarter of last year the average amount being saved was £1376 per person, and this has fallen to £910 per person for the second quarter of this year.

Tom Smith
1st October 2007

Tags: emergency, savings, self employed, average, salary, accounts

Graduate mortgage lenders run risk, IFA says

Those lenders who allow recent graduates to take out mortgages with them do so at their own risk, Balmoral Associates said today.

The independent financial advisor said that the mortgages, which typically lend at five to six times salary under the assumption that wages will increase over the years, were not “very common”.

Director at Balmoral Associates Paul Monk also took care to distinguish them from 100 and 110 per cent mortgages, saying that the graduate loans were aimed at those who had read a “professional course like medicine or law” and whose “salary is going to increase dramatically over a short space of time”.

Given that a proportion of graduates will remain on similar wages after some years, however, Mr Monk added that “the lender’s taking a big risk” in offering the service.

“The lender’s banking on the fact that because of the sort of job you’re in that that is automatically going to happen but it’s not always the case,” he added.

Mr Monk also commented on the recent US sub-prime mortgage crisis, saying that the UK market might “tighten up” on lending, with recent graduates among the first to feel the squeeze.

Tags: service."The lender banking, medicine, law, United Kingdom, time, recent graduates, market

Negative equity from 110 per cent mortgages

So-called ‘110 per cent’ mortgages, which do not require an initial deposit from holders, are becoming an increasingly popular option among home buyers, with house prices in the UK growing fast.

First-time buyers in particular, who tend to be younger and have little or no savings, find them particularly appealing.

However, industry experts, including those at Baronworth Investment Services, counsel against seeing taking out such a mortgage as a risk-free endeavour.

Michael Brill, a director at the company, said that the ideal 110 per cent buyer was “The young professional… who hasn’t got a deposit and knows they are going to have a nice increase in salary in a couple of years time.”

However, he warned that “if we have a crash in property with a negative equity from a 110 per cent mortgage”, holders “could end up with further negative equity.

“That is one of the big disadvantages”, Mr Brill surmised.

The Council of Mortgage Lenders (CML) recently revealed that the proportion of first-time buyers in the UK rose from 48 per cent to 56 per cent in 2006.

Tags: proportion, house prices, salary, increase, couple, first time buyer, professional, Economic history

Some people may never own their own home

According to recent reports future homebuyers could face house prices that are up to ten times the amount of their salaries, which means that many of today’s younger people could face the prospect of never being able to purchase their own home.

The research from the government backed National Housing and Planning Advice Unit (NHPAU) indicates that in order to avoid this situation many more homes will have to be build, otherwise millions of people will be left out in the cold when it comes to home ownership in the UK.

According to the research over a third of those that do not own their own home at the moment are doubtful that they will ever be able to afford to buy their own home. Another 20% of non-homeowners believe that they will have to wait a minimum of five years before they can afford to consider getting onto the property ladder. The purpose of the government run National Housing and Planning Advice Unit is to offer advice on improving affordability in the housing market.

The figures indicate that just seven years ago the average house prices was around four times the average salary of the consumers. However, with prices set to rise to ten times the average salary future generations face a very bleak future when it comes to the possibility of home ownership.

According to the chairman of the NHPAU: ‘First-time buyers have seen a big rise in the deposit needed to buy a home and the amount of their income spent on mortgages. Demand for housing is growing and unless action is taken, pressure on the market will only get worse.’

Tom Smith
4th July 2007

Tags: time, salary, young, wages, cost, price

Unexpected bills catching us out

We are regularly being hit with a bill or expense that we have not budgeted for.

That is according to new research by Abbey which shows that in the last 12 months, 79 per cent of us have had to fork out an average of £1,375 on an unexpected outgoing.

Abbey calculates that we have spent a combined £48.7 billion in this way in the past year and says that home repairs are the most expensive unexpected cost.

Around 36 per cent of Brits spent £1,206 on home repairs, 42 per cent had to stump up for surprise bills and 29 per cent spent £447 in the last year on unanticipated travel expenses.

Most of us might feel pretty hard done by if we were hit by an unexpected cost but Abbey points out that if we kept control of our banking situation, we would be prepared to deal with the surprise expenses.

“You never know what life is going to throw at you. However, you can prepare for the unexpected through building up a ‘buffer savings fund’ to help deal with these shock events,” said Reza Attar-Zadeh, head of savings at Abbey.

“Most experts recommend that you build up a fund of at least three months salary in an instant access cash account.”

The research also found that people living in Wales were the best budgeters, while those in the south-east were the worst.

Tags: surprise, shock events, salary, Building Types, Banking, Business Finance, travel

Finances are taboo

Most of us are more comfortable talking about health issues with friends and loved ones than we are discussing finances.

That is according to Scottish Widows which carried out research into the subject and found that banking has become a taboo subject.

Two thirds of us apparently do not tell our family members how much we earn and only one third know how much our partners earn.

One in five admit to being uncomfortable talking about salary, savings and investments with out partners, yet we are most comfortable discussing money with our work colleagues.

Men are said to be twice as likely to reveal their salary to a work colleague as they are to their mates.

Scottish Widows’ customer and brand marketing director Mike Hoban is surprised by the trend but says that it also explains why many people’s finances are in a mess.

“As a nation, we’ve become increasingly liberal – we are happy to talk to our loved ones about sex, relationships and health problems, but despite this modern trend in honesty it seems that money is now the topic we avoid,” he said.

“It’s no surprise that the nation is under-saving and under-preparing for the future when money is clearly such an uncomfortable subject.

“If you really can’t face discussing money with people you know, it might be a good idea to seek professional financial advice,” he added.

Tags: investments, scottish widows, hoban, Widows, research, family members, salary, Scottish