What is the difference?
There is one main difference between Life Insurance and Income Protection; that being that Life Insurance is a policy formed to protect you after death and helps to support your family when you are not around. However, Income Protection is a policy, which protects you during your life normally if you have had an accident, sickness or Redundancy or need help paying your mortgage payments.
What is Life Insurance?
Life Insurance is a policy designed to help protect your family and loved ones if for some reason you pass on earlier than expected. It is designed to help your family out financially if you are worried they won’t be able to cope in terms of money if something were to happen to you. What does Life Insurance provide?
It provides your family with a lump sum of money if you were to pass on between set time periods, usually 25 years. The sum of money is normally used to help pay off mortgages, inheritance tax or used to help with childcare or other financial obligations which your loved ones may carry. Different Life Insurance Policies. You can chose a policy that gives a monthly income amount instead of a lump sum, which can be used to help with a smaller income salary and help to replace the salary that used to be yours. There are different types of Life Insurance, which can protect you in different ways. ‘Whole of Life’ Insurance protects you throughout the whole of your life but tends to be more expensive however helps to protect your assets from Inheritance Tax. Term Insurance is the one people tend to buy and covers you over a set time period.
What is Income Protection?
Income Protection is an insurance you can take out which makes sure you have cash when you need it most and secures your ability to pay bills and expenses when something unexpected and serious happens to you. It helps you if you have had an accident, can’t pay your mortgage, have suddenly fallen under unemployment or are out of work due to a sickness. Redundancy cover. There are three types of Income Protection cover consisting of Redundancy, Accident and Sickness and MPPI. During the last few years Redundancy has become a main worry amongst employees, in 2012 it stood at 2.68 million people being made redundant, meaning a sudden loss of income for the majority of people. The redundancy policy helps protect you against this and helps back yourself up in times of need.
However you may only need to take out accident and sickness if you have been with a company for a long time, in this case you might get a payout from your employee at the time of redundancy but this doesn’t mean to say it will be a large amount of money and might only cover you for a couple of months without a job.
Accident and Sickness Cover.
This policy protects you during that time when you are suddenly faced with a form of sickness or maybe you have been in an accident. It gives you the chance to recover from your trauma without any extra financial issues added on. Although it is only a short term solution so you might want to consider taking out critical illness cover to support yourself as well, this policy is a good option to take as it continues to support you if your illness means you are unable to return to work. You can make this policy work out cheaper for you if your current employers have a good accident and sickness plan which helps benefit you, as this way you would only need to take out the Redundancy policy. MPPI stands for Mortgage payment protection insurance and it is designed to help you keep up to date with your mortgage payments to insure you don’t fall behind and end up dragging yourself into debt. It can be a cheap form of cover and way to protect you. How it works is that the insurance company pays the money straight to you, but it is then your own responsibility to use that money to pay the mortgage lender so you don’t fall behind.