Short-Term Income Protection Insurance
Short-term income protection insurance is a good guarantee to help you out for a short period of time but is it a better choice for you over income protection?
What is short-term income protection?
This insurance policy pays out a portion of your income in case you are not able to work due to illness or accident. Unlike income protection, short-term income protection also covers unemployment due to redundancy. Some financial advisers suggest short-term income protection to those who have recently taken out a loan or mortgage so that they can still keep up with the payments for a short period of time, giving them the chance to stay on track while looking for other jobs. Once you put in a claim, start receiving payouts after a few days. The payouts usually last until you return to work or for a set number of months, usually from 12 to 24 depending on your policy. Visit IncomeProtectionAdvisors for more info.
When is short-term income protection insurance right for you?
Short-term income protection insurance is worth considering if you have rent or mortgage to pay as well as other important monthly expenses that you cannot afford to miss out on. This type of insurance is very suitable for you if your savings is not enough to see you through when you become sick or unemployed. This is also right for those who are self-employed and don’t have sick benefits or redundancy pay from employers.
What does it cover?
Like any other insurance, the extent of coverage depends on the policy you take out. However, the basic coverage includes:
- Losing your job or closing your business
- Become injured because of accident
- Acquired illness and can no longer work
There are also short-term income protection policies that offer the option to add life cover. The details of what your short-term IP covers depends on the policy you have and of course, the level of protection has a direct effect on your premiums.
What are the exclusions?
Short-term insurance polices have exclusions that should clearly be explained to you prior to taking one out. The basic exclusions include:
- Pre-existing conditions
- Self-inflicted injuries
- Injury or sickness due to abuse of alcohol or drugs
- Voluntary unemployment or pre-existing unemployment chances
The pros and cons of short-term income protection
Pros:
Unlike IP, short-term IP covers unemployment as well. If you are on a fixed-term contract, you can still get cover as long as your policy directly states it. Otherwise, you will not be eligible for a claim.
Short-term income protection is also good for the self-employed. Since people who are self-employed do not receive sick benefits from their employers, short-term IP is a good fall back in case they get sick or injured. When it comes to unemployment though, you should check and make sure that your policy covers the closure of your business as well.
Cons:
Short-term IP is only a temporary solution for the covered conditions. After your term expires, you will have to find another way to come up with income that will be enough for you and your family.
Most short-term IPs do not cover pre-existing conditions. Another thing to be aware of is that your insurance company has the right to cancel cover or increase premiums with a short-term notice as well, as little as 30 days.
If you are sold on short-term income protection and you think that this is the best insurance for you, you have to think about a plan after your cover expires. Short-term income protection is only a temporary solution. It provides very much needed help at the time you need it the most but you will have to think ahead as well.