Monday, January 23, 2012

Is It Time to Review Your Income Protection Insurance Policy?

If you're self-employed, your income relies totally on your ability to work, so if you fell ill or suffered an injury, do you know how you would support yourself financially?

Income protection insurance provides a regular tax free income if you are unable to work because of illness or accident. But having an income protection policy is just the first step. You need to make sure your policy is giving you the benefits you need, so a review may be a good idea.

Ask yourself these five questions to make sure you get the most from your provider:

1) Are you getting value for money? Are you paying the correct amount to receive the level of cover you want? Are you receiving any benefits? Many friendly societies offer a share of the company's profits and give a tax free cash lump sum at the end of your policy. So check to see if you receive this benefit. Also, do your homework so you have the most cost effective solution for you.

2) What are the insurer's claim pay out statistics? Some companies pay over 98% of claims, so it may be a good time to shop around and switch provider. You may have already chosen a provider with a high pay out rate, but are they keeping their promise? Perhaps check their website for their latest statistics.

3) What does your policy cover? Have you looked into what type of illnesses and injuries your policy covers? Do they cover short term illnesses as well as long term as even a case of the flu could leave you off work? Does your level of cover provide what you require? If it doesn't, then you may need to upgrade or change provider.

4) When will you receive payment? If you make a claim, will you be paid immediately or do you have a deferment period? Decide if you want to receive your money straight away or if you are happy to wait. Also, find out how quickly your claim will be processed. Getting your hands on the money when you need it most is very important.

5) Have your business circumstances changed? If you have changed business circumstances, let your provider know as this could affect your protection and the level of cover you receive. For example, have you gone limited? Seen an upturn in profits? All these can contribute to a change in cover so regularly review your circumstances to make sure your policy still suits your needs.

Once you have answered these questions, you should have the perfect income protection package that suits your circumstances. However, if it doesn't, perhaps it's time to shop around to find the perfect solution.

David Thompson is CEO of dg mutual - income protection specialists who have been helping self-employed professionals to protect their income since 1927.

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