Owning a business has pros and cons that must be configured and addressed correctly. Imagine owning a company running successfully, but if something were to happen and you couldn’t accrue the same income anymore?
Due to severe injury or illness, you may lose your capability to work permanently or temporarily. However, this does not imply that you can get away with your bills or day-to-day responsibility. This is when you can opt for income insurance to protect yourself and your family from financial hardships.
This article will help you with in-depth information on income insurance, how it works, and its benefits so that you can secure your finances if life throws something unfortunate along the way. Before we begin, let’s first explore what we understand by income insurance.
1. What is Income Insurance?
Income insurance protects your primary source of income if you suffer from a disability or illness that limits you from going to work and earning a stable source of income. The income insurance will cover your expenses until you are capable of resuming work or till you pass away, depending on the terms of the insurance.
Designed to cover up to 70% of the monthly income, income protection insurance is calculated based on the business owner’s share. This amount is also subject to any mortgage or loans taken by the business owner. However, this can always be negotiated with the provider.
Income insurances are usually of two types. These are Permanent Disability Income Insurance, which provides payments in the event you are permanently unable to earn, and Sickness and Injury Disability Income Insurance. In the latter, you are subjected to coverage for the period you are unlikely to work and earn.
Income insurances are exempt from income tax charges, which makes it convenient for business owners to cover bills or extra costs that may incur.
Now that we have understood income insurance, let’s look at how it works so that you can always stay prepared.
2. How Does Income Insurance Work?
Income insurance is intended to provide coverage in dire circumstances; your claim will not get approved if you have closed your business on your own accord or in similar cases. As a business owner, you can apply for income insurance only when you cannot continue working, whether for a shorter term or permanently.
Once you lodge a claim for income insurance, insurers will perform a background check of your past 12 months’ income and consider your conditions. Each income insurance policy has specific terms and conditions and many benefits.
Upon lodging a claim, there is a waiting period, usually determined by the policy terms. However, applying for a shorter waiting period would increase the cost of your income insurance, whereas a longer turnaround time would require you to pay lower premiums.
Depending upon your benefit period, your premium cost will differ. While a shorter benefit period might cost lesser, it would also expire early. Alternatively, if you go for a more extended benefit period, say, till retirement or until you expire, the premium cost will be high, but you will be able to enjoy the benefits for longer.
It's essential to consider the status of your emergency funds while choosing the period and other factors, such as your medical history, the severity of the current financial situation, etc. Once you provide this information to your insurer, they will customize a plan that works for you.
Now, let us understand the costs involved in income insurance so that you can plan ahead of time and stay agile.
3. How Much Does Income Insurance Cost?
The role of business owners is primarily administrative or managerial- hence, the income insurance premiums for business owners cost much less compared to policyholders in other professions. Nevertheless, the total amount varies depending on your industry or sector.
It is also affected by your physical conditions, whether you smoke or not, medical history, age, gender, and several other factors. As smoking considerably reduces one’s life cycle and can lead to prolonged illnesses, smokers must pay more than non-smokers.
Lifestyle also plays a vital role in determining the policy cost. The premium will cost you more if you are involved in manual labor in your profession. However, this is rarely the case for business owners, as mentioned above- hence the premium cost is always cheaper.
Income insurance premiums can be either stepped up or at a level stage. This means that while a level premium will stay the same over time, a stepped premium is usually low at the start, but the cost increases with time.
Your insurance income cost is also dependent on the provider you choose. While some insurance companies have a nominal premium cost, some have high premium charges due to good customer reviews, better policies, and positive customer experience. The range of benefits you are entitled to on a policy also determines your premium cost.
If you're acquiring a wide range of benefits from your income insurance policy, then it is likely that you are going to end up paying more for your premiums as compared to a policy with standard benefits and coverage.
Now, we will look into the factors that income insurance protection covers to gather complete knowledge.
4. What Does Income Insurance Cover?
Income insurance primarily covers up to 70% of the monthly income to provide an optimum level of financial security in the event you become incapable of earning. The most common causes covered by income insurance are illnesses such as cancer, stroke, heart disease, accidents, musculoskeletal problems, flu, and infections.
Some providers will allow you to include certain illnesses in the policy at an extra fee. You will also get the option to have your children in your policy, but it mostly depends on which provider you choose.
As your insurance policy gets approved, it will ease your financial situation as you can pay off your bills, mortgage/rent, living expenses, or health costs with income insurance and continue to live your ordinary everyday life that isn't threatened by external circumstances.
As a business owner, you're responsible for the operations of your business, and if something goes wrong, naturally, it is your responsibility to look after the casualties. With income insurance, your flow of income will not seize, and you will have the option to figure things out quickly, as the policy will cover your basic expenses for your choice.
Now that we have a detailed overview of how income insurance works and its coverages, let’s explore the benefits of income insurance and how it can add value to business owners in times of need.
5. Benefits of Income Insurance
Peace of Mind
One of the most significant benefits of income insurance is that it provides assurance and peace of mind. Sudden accidents or illnesses need not be the cause of our financial worries if income insurance takes care of our expenses in such dire circumstances.
Pay Your Bills on Time
Income insurance provides financial security so you can pay your bills and mortgages on time and stay stress-free.
Zero limitations. Income insurance is not limited to a certain number. You can claim income insurance as and when necessary, depending on the severity of the situation.
Income insurances are flexible as the policyholder can decide the duration of the claim. You can choose a tenure depending on your requirements, and you will be covered for that period without any interruptions.
The choice is yours if you wish to go for a two-year coverage or coverage that secures your finances for a month. The policyholder can also determine the terms of the policy to a certain extent, which makes the coverage terms and conditions flexible.
Secure Your Family
If you are the primary breadwinner of your family, then you cannot simply think short-term. You will have to take the safety of your dependents into account. With an income insurance policy, you can include your children in the coverage plans, securing their financial future.
However, it is essential to remember that an income insurance claim is only effective when the business owner is physically ill or injured.
Protect Your Finances with Income Insurance!
Unwanted incidents never come with a warning and often leave us high and dry. This can lead to anxiety, depression, and physical and mental health issues that can worsen matters.
Business owners should consider every possibility and the potential risks involved at the initial stage of the business to minimize future risks and create a backup for emergencies.
With income insurance, you will always have secure financial coverage and stay on top of your debts, loans, and mortgages.
If you are looking for affordable income insurance plans with the best benefits and coverages, Asteya’s income insurance plan has you covered. Request for a quotation today for a secured future!