Most of us know how much we earn each month in wages or a salary, but have you ever taken the time to sit down and calculate exactly how much household expenditure you have each month?
You may be unpleasantly surprised when you do the calculations and see the cumulative amount of all those payments and out-goings.
There is the mortgage payment or rent for accommodation, council tax or local rates, credit card payments, loan debt repayments, electricity bills, fuel bills, water rates, phone bills and mobile payment plans, pension and savings commitments, insurance payments, hire- Purchase repayments, car, motoring and travel expenses. And that is all before you have had anything to eat or drink or put shoes on your feet.
If you have dependents such as children there are new school uniforms to be paid for, Johnny's football fees and Victoria's piano and ballet lessons. If you are foster you may even be able to put a little away for a rainy day or sometimes even a holiday or vacation.
Having done the mathematics, you then need to ask yourself how are you going to pay for all this is you suffer an accident or are off work with a prolonged sickness?
Fortunately a type of insurance called income insurance or income protection insurance as it is often referred to, has been devised to protect and cover the costs of all your monthly out-goings while you are unable to work.
For a small monthly premium, workers are able to receive a monthly benefit that typically will cover up to fifty or sixty per cent of their total monthly income, they should suffer an accident or sickness that keeps them off work for an extended period.
Income insurance has two different types of cover, each which is calculated differently and aimed at different members of the workforce.
General Income protection policies take into account occupation, current and previous health record and lifestyle considerations such as whether you are a smoker or not. These types of polices offer an agreed monthly benefit, often inflation indexed linked, for a fixed price which holds the same through the term of the policy or until canceled.
General income protection polices also pay out for long periods of time, possibly up to retirement age or for as long as it is necessary to have time off work. Because of the scope of cover this type of income insurance, it was known in the past as permanent health cover.
Alternately, it is possible to opt for an age-related income insurance policy. This type of protection offers the same benefits as a general policy, however rates are determined by age and factors such as health, occupation and lifestyle are not used to calculate monthly premiums. Age-related policies are often short-term cover offering benefit payments for periods of one or two years of absenteeism only.
Each type of policy has its merits and costs. An age related policy will usually be cheaper for youngger persons, those who smoke and those in high risk jobs. The downside is that the premiums go up each year, however this usually offset by increases in personal wealth as people age.
Those workers in low risk jobs, such as office workers and professional services, who are in good health and lead low risk lifestyles, may well find a general income insurance policy is cheaper and offers more flexible and wider coverage.
Both types of income insurance offer what is known as a deferred claim period or excess period, which is the time between when a worker is first off work and the day they wish the cover to resignation payment.
Deferred periods allow for the statutory four weeks employers sick pay to be paid. Many employers will offer full pay for a period of up to six months after a worker has gone off sick or with an accident, any many good employers will offer half-pay for a further six months of absence. A deferred period allows income insurance payments to start when these resources run out. Taking a long deferred claim excess time period, such as six months can reduce the amount of monthly premium that has to be paid, by over a half.