Income Insurance Protection and Premiums

Insurances

Insurance is a critical part of securing a mortgage financially and protects an individual in the areas of life, sickness, accident, income protection and more. Read information on each of the insurances available or get a free assessment online.

Income Insurance

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Income Insurance Protection


Income insurance, also known as income protection insurance, income replacement Insurance, permanent health insurance or long term disability insurance, is a type of insurance that provides a regular income in the event of you becoming unable to work.

Income Insurance Conditions


Although the income insurance concept is quite simple, variations between policies from different providers do exist; in particular, the definition of being ‘unable to work’. Three common definitions of being unable to work are in common use:

• being unable to do your current job;
• being unable to do your current job or an equivalent job for which you are qualified;
• being unable to undertake any kind of paid work.

When choosing an income insurance policy, you should decide whether or not you would be willing to undertake a less desirable job, if you couldn’t continue to do your current job. The level of income insurance premiums reflects the probability that you would make a claim. Therefore, the more flexible you are about accepting alternative employment, then the lower your premiums should be.

Most income insurance policies will pay out if you have a genuine reason as to why you’re unable to work. However, some policies have exclusions for incapacities resulting from HIV/AIDS, drug abuse, self-inflicted injuries and, in some cases, even pregnancy. The usual caveats relating to choice of insurance apply – read the small print before choosing an income insurance policy.

Types of Income Insurance Premiums


Premiums for income insurance policies will either be fixed (i.e. the monthly premium will remain constant for the duration of the policy), or variable (i.e. the monthly premiums start at a relatively low level and increase as the policyholder gets older). Premiums will be lower if the policy includes a 60 or 90 day excess, i.e. the policyholder has to be incapacitated for the length of the excess period before being able to make a claim.

Who Needs Income Insurance?


If you are self-employed, taking out income insurance makes a lot of sense, as you’re unlikely to have any other means of paying your regular housing and living costs if you become incapacitated and are unable to work. Large companies and public sector employers are likely to offer some form of sick pay scheme to their staff, so income insurance is likely to be less important to these employees than to the self-employed.

Alternatives to Income Insurance


The choice of type of personal insurance depends very much on the person’s own individual circumstances. Factors that could influence the decision include whether you are looking for a regular monthly income or a lump sum payout, whether you have dependents and whether personal health is an issue. Private medical insurance, critical illness insurance, life assurance or accident and sickness insurance all offer possible alternatives to income insurance protection.

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