Insurance

Government estimates are that 70% of mortgage borrowers would not be eligible to receive Income Support due to their savings, income, or having a working spouse or partner.

In 1998 alone, the introduction of a new incapacity test resulted in 102,000 claimants being turned down for state benefit. An independent doctor (i.e. not your own doctor) now has to assess you and to qualify for state benefit.

Income payment protection insurance also known as accident, sickness, and unemployment insurance is designed to cover you in the event that you cannot work b ecause of an illness or disability. Dependent on the insurer, a good income payment protection insurance policy will maintain your monthly income for a specified period until you are able to return to work or until the policy terminates.

The level of cover provided by the insurer will vary; some policies will cover 60% of your earnings but many will provide cover for up to 75% of your earnings. It is also possible to increase the level of cover in line with your earnings.

When considering which insurance company to take the policy out with, you should pay close attention to the definition of a disability, for example one definition may be that you cannot perform a specific occupation. In order to define which category you fit into, some insurers will use an income based test of disability and will pay the difference if you cannot generate a certain percentage of your previous income due to sickness or injury. Others use a duties based test, where they pay out if you cannot carry out an important duty relating to your occupation.

Taking out an income payment protection insurance policy becomes a more pressing requirement once you are in full time employment and have dependents or investments on which you have debts. If you have a family and are unable to support them due to an accident or sickness which has led to you being unable to work you will find that any life savings will quickly disappear.