here’s no doubt that income protection insurance can be a valuable addition to a defensive financial portfolio, whether you’re in Tucson, Arizona, or Sydney, NSW. However, it’s crucial to avoid making rookie mistakes when purchasing this type of cover. Get it wrong and your insurance could turn out to be useless. On the other hand, a well-chosen income protection policy could make a huge difference to the quality of life you enjoy in the event you’re unable to work for an extended period. So let’s dive in and find out what the biggest mistakes are when buying income protection insurance for the first time and, most importantly, how to avoid them!
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5 Income Protection Insurance Mistakes You Must Avoid
No matter your chosen profession or current level of seniority, insuring your income is an excellent way to prevent a precipitous drop in living standards should you be incapable of working due to serious illness or injury. But there are some important things you need to be aware of and make a conscious effort to avoid when buying your first policy.
1. Lying About Your Income – If you quote an inflated figure for income when applying for a policy, it will be invalidated. When your insurer discovers the fraudulent information, your policy will be cancelled without notice, and you could be liable to criminal charges too.
2. Buying More Cover Than You Need – When you buy your first policy for income protection insurance, it can be tempting to purchase as much cover as possible. However, unless you actually spend your entire salary every month, you could end up paying more than necessary by taking this approach. If you normally spend around 50% of your salary on essentials, choose a policy that provides this level of cover rather than maxing the cover out at 70% of your salary (the highest level of income protection cover that many insurers offer).
3. Not Shopping Around – Insurance markets are highly competitive in most developed countries, which means it’s well worth shopping around. If you settle for the first income protection insurance product you find, it could cost you dearly in terms of inflated premiums.
4. Ignoring Waiting Periods – Wherever you purchase income protection insurance, there will be a waiting period stipulated in the terms and conditions of your policy. This is the length of time you will have to wait before receiving your replacement income payments when making a claim. It’s very important, of course, to be aware of the waiting times associated with any policies that you’re considering.
5. Not Taking Account of Policy Exclusions – To avoid any unpleasant surprises down the line, it’s vital to be aware of all policy exclusions when buying income protection insurance.
In addition to avoiding these 5 rookie mistakes, it’s always a good idea to check online reviews of individual insurers before making a purchase.
Also Read : The Link Between Comfortable Workspaces and Increased Profits
A Final Word of Warning
Always make sure any insurer you deal with holds the appropriate licence for selling insurance in your part of the world.
