Income Replacement Insurance

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Income Replacement Insurance

Income replacement policies help replace part of your regular working income while you are off work.
The risks covered can include disability, illness, accidents, unemployment or involuntary redundancy.
If you buy a policy, you will usually be paid a tax-free monthly income if you find yourself unable to work. You pay a monthly premium to your insurer for your chosen policy which will pay out after a pre-agreed waiting period.

Most policies have a pre-agreed waiting period. Also known as the deferred period, the waiting period is the time between becoming unemployed and / or when payments begin. It can mean you pay lower premiums.

An income replacement policy will mean that you can pay your bills, rent or mortgage if you are unable to work.

To decide on the type of policy you need, think about:

How you and your family would manage financially if you were unable to work or lost your job
Whether you only need to cover your loan or debt repayments or whether you might need to cover your wages
How much cover you need. For example, if you already have a health plan that covers you in case of sickness or injury then you may only require unemployment cover
Whether you already have cover through your employer (you may receive a group income protection cover at work)
What might affect your cover (such as your age, medical history, lifestyle or job)
Whether you need cover if you are self-employed or you are a casual worker

Some reasons you may need income replacement cover

To ensure you and your dependants are covered if you are unable to work
If you work for yourself
Starting a new job

Types of income replacement cover

Income protection (IP) replaces your salary if you are off work for a long period of time (potentially up to the expiry date of your policy)
Payment protection insurance (PPI) helps you pay your loans (such as your mortgage) or debts (usually up to 12 months)
Short-term income protection (STIP) gives you a monthly income for an agreed amount of time (usually up to 12 months).

Source: Association of British Insurers

Moving Abroad Checklist

Initial Considerations

Will your partner be travelling with you?

If so, what will they be giving up in your present home and will they be able to continue with their career in your new home? You will need to check whether a separate visa is required for your partner to work or if your visa gives that right. If they are unable to work you will need to decide on the effect on your finances and what alternatives are available to give a fulfilling life (home business, training, voluntary work).

Are you taking family with you?

Moving with family raises many exciting opportunities, but also can create challenges. The HSBC Expat Explorer survey indicates that expat kids can take six months to settle in to their new country (see article). Getting young or even older children to prepare to move and leave their friends and family behind can be a challenge and should be thought through.

The options for education is another area that needs to be thought through.

Moving your child to a new country with a different education system can be a great opportunity to broaden their experience, but if they are close to key exams the timing can make this inadvisable. If you do take your family with you, it is important to decide between joining the local school system or choosing an international school.

Where will you be living?

Whether you will be living in a house or apartment, furnished or unfurnished, these decisions will affect what you need to take with you. The time you are planning to live overseas will also affect whether you should leave your property at home empty, rent it out or sell it. See the article Sell, Store or Ship.