How Much does Protection Insurance Cost?

Income protection insurance cost - Funds Hero

You assume an important role in your family by providing financial security, in part or completely sufficient income to ensure their welfare. Keeping in mind unforeseeable future, wherein your income stops, you would want to preserve the standard of living of your family and allow your loved ones to cope in times of hardship and overcoming the lack of benefits by supplementary guarantees.

How do you deal with the different insurance contracts? What pitfalls to avoid?

Protection Insurance -  Risks and Pitfalls to Avoid

Most insured people have not read the terms of their contracts specified in a document called “general provisions” or “general conditions” which only look at the front of the estimate that summarizes the benefits and often very well “inlaid”. It is true that it is not easy to read these text-pads full of insurance terms.

First of all it is important to specify that a good protection insurance is not necessarily more expensive than a less good! It is often the opposite. To avoid inconvenience, here is a summary of the right questions to ask before choosing your contract foresight.

What is the difference between “Indemnity” contract and “Flat-rate” contract?

The vast majority of contracts are “compensatory” and are market offers. Their purpose is to compensate the loss suffered by the insured due to the loss of income. This is why an “indemnity” contract will systematically verify the actual income of the insured. In addition, the contract will automatically subtract compensation payments that pay the compulsory scheme.

The indemnity contracts:

Upon accession, the officer subscribes to the contract at the level of his current income. However, in the event of a stoppage of work, he will receive an allowance equal to the income actually received. In the event of a decline in income, the indemnity is of course revised downwards (even if your contributions are always linked to the services originally subscribed), the reverse being not possible. This type of contract therefore requires making a point every year on these benefits.

The flat-rate contracts:

When subscribing the contract, the officer sets the level of his daily allowance. The higher the contribution, the higher the indemnity. In the event of incapacity, he will receive the allowance for which he has contributed, regardless of his current income. Obviously, this type of contract should not motivate one to stop working by having subscribed a contract out of proportion to his income. This is the reason why certain insurers control the level of the subscribed allowance at the time of accession, regardless of the change in income.

How much does protection insurance cost?

Case 1: 

If you are a young couple, with children and a mortgage and both working full time with annual salaries of £35,000 and £23,000. The combined weekly household income is £860, with £515 being the highest earner. Hence the main earner pays £18.35 per month, which covers 65% of his income. In case of income stoppage, the policy will cover 65% of the main earner’s salary, totaling £355, which will be a weekly income of £705.

Case 2:

Now imagine an older couple, both working, with no children, health problems and have a mortgage.

Their annual salary  = £27,000 and £19,000 respectively.
Combined weekly income  = £755.
Main earner income  = £405
Secondary earner income  = £295
Main earner pays  = £31.40 per month (income protection for 60% of his salary.)
In case of main earner income loss  = weekly income falls to £295
The income protection policy adds  = £310
Total income received                        = £605

Just like one buy shares, in case you can’t figure out which income protection insurance to choose,  Considering a financial adviser is highly recommended.

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