Too often, you won’t even see it coming. Maybe there were behind the scenes financial troubles that management was unwilling to share. Perhaps you received an injury that left you unable to work for months at a time. Even downsizing can cause it. Unfortunately, job losses are one of those things that everyone knows about but few are truly prepared for. While it isn’t always fun to plan for the worst, it’s important that you have a contingency in place in case you suddenly find yourself without employment or a steady income stream.
What is income protection?
Income protection is a form of insurance that’s in place to help provide assistance in the unfortunate event of a job loss. It’s a great safety net in an era where severance as a result of job dissolution is less and less guaranteed by employers and a sensible choice if you’re concerned that a job loss could prevent you from paying bills, affording rent, and maintaining your standard of living. Income protection insurance works much differently than severance, too. Whereas severance is often an agreed-upon amount provided by an employer at the point of termination, income protection pays out a regular, tax-free income replacement if you find yourself unable to work as a result of illness, injury, or other extenuating circumstances.
Income protection also differs from unemployment. Whereas unemployment income has a vast amount of stipulations to claim your replacement income, income protection is less stringent with its policies and procedures. There’s also a distinction between how long unemployment and income protection last. Though it varies by state, unemployment is set for a finite period, typically six months. When that time has expired, the applicant has to reapply for benefits. If they are denied or no longer qualify, they will no longer receive regular payouts. For income protection, you can elect specific waiting periods. The longer you defer your benefits, the cheaper the policy. After it goes into effect, it pays out until you’re able to secure new employment, until you are able to retire, or, in some cases, until death.
Alternatives to income protection
Believe it or not, many individuals with active life insurance policies occasionally sell their insurance to brokers and direct buyers. Types of life insurance that allow this will vary from provider to provider, but oftentimes, you’re able to use a third party to conduct a sale regardless of your specific policy. Keep in mind that this isn’t necessarily a fail-safe as there’s no guarantee that your policy will be purchased, but it is a viable alternative for income protection in a pinch. You may want to consult with a specific sales entity to determine whether or not it’s the right course of action for you.
On top of this, depending on where your income bracket falls once you are no longer employed, there are government-provided income and insurance sources that, while not a king’s ransom, are still effective. Though there are stigmas surrounding government-supplied income sources, it’s never a bad idea to ask for help when you truly need it. It’s a far better alternative than having to relocate due to unfeasible mortgage and rent payments, plus it helps to ensure that you’re able to live through the day-to-day.
Income protection isn’t something that many people want to think about but it’s important to consider when creating a contingency plan for the future. Take the necessary steps to make sure that you’ll be able to handle any necessary payments and bills in the (hopefully unlikely) event that you suddenly find yourself without a steady, reliable source of income.