Why is Income Protection Worth Considering for High Earning Executives?
You might be asking why you need to have income protection if you are already earning a considerable salary. Unless you have an awful lot of savings and a retirement fund you can live on then you don’t need income protection. On the other hand, just think about the benefit you can get from income protection if you have to suddenly stop work because of an illness or injury – aside from the monthly income you receive when your policy kicks in, you don’t need to touch the savings or retirement savings you have to pay for other extra expenses.
Benefits of getting cover in place
If you are a high earner, you may seem less vulnerable to financial hardships because of big pay check. However, this does not mean that you are more immune to unexpected events like accidents or injuries. Statistics have in fact shown that 35% of high earning investors with an investable asset worth $200,000 still find themselves wanting a loan to pay for unexpected expenses. Hence, getting income protection to supplement your finances in times of medical difficulty is a wise move.
35% of high earning investors with an investable asset worth $200,000 still find themselves wanting a loan to pay for unexpected expenses.
Moreover, there is one income insurance benefit available for high earners such as doctors, lawyers, and executives – the maximum benefits payable non offset clause. Basically, income protection is paid out to top up your workers compensation benefit so that it would total to 75% of your gross monthly earnings. Having a non-offset clause in your income protection policy, however, will allow you to receive more money aside from the compensation you have.
Although not all insurers have this non-offset clause, there are already a number of insurance service providers who offer this to high earners. Moreover, the non-offset clause may also vary according to the type of policy you choose.
Aside from this benefit, income protection has more advantages and benefits for you and your family;
- It can help you pay loans and debts. Loans and debts are unavoidable
They are incurred when you buy a house, a car, or just purchase something. Of course as long as you are able to pay them, it is no problem. Trouble comes in, however, when you cannot keep your financial obligations due to illness or accident. But when you have income protection, you will have something to depend on to help you pay for these loans and debts.
- It helps you pay for expenses during recuperation
Your health insurance can only go as far as when you are being treated for your illness. However, what about after the time you are out of the hospital? How will you fully recover if your savings are depleted? The benefits you get from income protection will be able to assist you with expenses needed to make necessary changes and modifications to fit your current lifestyle.
- It can help you maintain your lifestyle
When illness or accidents strike, one of the hardest hit areas of your life will be your finances. Suddenly there are medical bills to pay, not to mention the modifications you have to do at home to complement your current lifestyle. When you have income protection, you don’t need to worry about drastic changes you have to do because money becomes an issue. You can still have the same lifestyle before the accident or illness.
Agreed value or indemnity...what's best for you?
Income protection insurance has two kinds of policies – indemnity value and agreed value. To say which one is better would be an injustice for both types since your choice would depend on your needs and your budget. Below is a quick overview of the two types of policies for better understanding.
- Indemnity Value – Under this type of policy, no medical evidence or proof is required upon application. However, this will be required when you make a claim later.
Aside from not requiring medical evidence, this policy also is more affordable, but with one drawback – the amount of the benefit you will receive is dependent on the last income you had before the accident or injury.
- Agreed Value – This works in exact contrast with the indemnity value. This means that you will have to present health or medical proof when you apply for cover, and no medical evidence is further needed when you make a claim. Furthermore, whatever changes in your income will not affect the amount of your benefit; thus, you have to pay a higher premium.
In thinking about your future, you need foresight, and income protection is one of those things you need when thinking about protecting your family and future. In order to get the type of income policy you need, you can talk to your financial adviser to help you come up with a good policy plan to secure your future and your family.