Income Protection - What Does This Entail?

By Author: Vijay Koragappa Shetty
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Is Income protection cover part of a loan or credit card application?

Yes, you have this option while you apply for a loan. You can opt for it if you think it is uncertain to have your job for long and you may be unable to pay back your loan dues.

On what grounds can you use this protection cover?

Your protection cover can be used in times of accident, illness, lay off or any other involuntary reason. This leaves you without any salary. Hence, you would be compensated with supplementary income. You will not be covered, if you have voluntarily resigned from your job.

If you get a good deal on loan, do you think their insurance cover is also good?

Not really, you must always check what is it that their insurance cover has, does it cover you for life time, and from when can you make a claim.

Is it compulsory to have a protection cover along with a loan application?

No, you need not necessarily apply for this insurance. If you are told that you have to apply for it, then the lender is just misguiding you on this. It is completely your choice whether you want the insurance or not.

Can ...
... you claim for the compensation as soon as you are out of work?

No, some insurance companies have it from 30 days and few others have it after 90 days of redundancy. You must check with your company when they would start paying you compensation.

Will you be paid full monthly salary in case you have lost your job?

This varies from one insurance company to another. Most often it is 50 to 70 percent of your salary. You can check with your agent or the company for this.

Are there any restrictions on how you would use them?

No, there are no restrictions as such; you can use it for house hold expenses, mortgage payments, grocery bills, credit card bills etc.

Will you be paid a supplementary salary if you resign voluntarily?

No, only if you have been laid off, met with an accident, may be bed ridden for long and have no salary coming in, then you can make use of it.

If you are in self-employment, retired, only working part time or suffering a pre-existing medical condition then a policy would not be in your best interests. By shopping with a specialist for the cover you will be given access to the key facts and exclusions which makes determining if you would be eligible easier.

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