Income protection cover - Insurance to Protect your Income

Income protection covers the individual’s income should he or she lose his job as a result of retrenchment, disability or critical illness. In such an event, the insurance company will pay out a sum on a monthly basis up to a certain amount of time (such as six months). This covers the loss of income, giving the insured time to find new employment without forcing him or her to cancel his or her insurance premiums and cover other obligations. Most income protection plans do not cover the insured for his or her whole income, but a portion of it, such as 70 per cent of the gross income. Income protection does not replace savings for this reason.

 Income protection can be a standalone policy, or added as an extension onto other types of policies, such as disability or dread disease cover. Often, a financier will require the borrower to take out income protection to cover repayments in the event that he or she is retrenched. It is important to note that income protection does not provide cover for loss of income should the insured resign from his or her position.