Updated: Apr 2, 2018
What if a Sound Recordist loses his hearing or a Graphics Designer loses her sight? A sudden illness or injury could rob a person of the ability to work. This is a huge concern, as many media professionals earn their living using very specialised skills.
Whether you are a freelance professional, business owner or employee, Income Protection Insurance (also known as “Disability Income”), could be one of the most important coverage that you’ll need.
1. You don’t need to be seriously ill to be unable to work.
15 million people suffer stroke worldwide each year, making it one of the top causes of disability. Even then, a person doesn’t have to suffer a stroke to become unable to work.
Common health conditions such as back injury, eye disorder or even vertigo are not severe enough to trigger a payout from your critical illness plan. But they could make you unable to hold down a job.
You may need a long period of time to recuperate before you could go back to work. In some cases, the condition may affect you for life.
2. Your income pays for everything.
Your family may depend on you to pay house & car mortgages and household bills. These expenses will not go away when you become unable to work. In fact, while you are recuperating, medical & rehabilitation expenses can become an added burden.
3. It is the only type of insurance that directly protects your income.
Medical insurance covers hospitalisation expenses. Long-term-care insurance pays out when you are permanently disabled. Life insurance compensates your family when you pass on.
These are the most common types of insurance that are sold. Yet, none of these are designed to protect you when you lose your income over an extended period of time.
Your ability to earn an income is your biggest financial asset. You should protect it.
How does Income Protection Insurance work?
It replaces your income when you become medically unfit to perform your profession due to an illness or injury. The benefit will be paid out whether the condition is permanent, or a temporary one - as in you could eventually recover from it.
Most plans in the market pay out a monthly benefit of up to 75% of your income. The payouts will last till your chosen retirement age, usually 65, or when you have made a full recovery.
Should you have to switch to a lower-paying job, because you are no longer able to perform your profession, a partial payout will provided to top up the difference. For example, a camera crew suffers permanent damage to the spine and has to switch to a desk-bound job.
Plans usually come with other benefits, such as rehabilitation benefit, death benefit, or a lump sum payout in the event of severe disability.
How does it fair compared to other types of insurance?
Most critical illness plans cover a limited number of conditions and payouts are triggered only when the illnesses are at a late stage. This is unless you have a critical illness plan that pays out for early stages. You’ll need to pay higher premiums for those.
If you have Whole Life insurance, you will likely be covered for Total & Permanent Disability or TPD for short. The definition for TPD is very strict. A person needs to be unable to perform 3 out of 6 activities of daily living - dressing, feeding, mobility, transferring, washing and going to the washroom.
In addition, the disability will have to be permanent and irreversible before a payout will be given.
This is why some people are of the opinion that an Income Protection Insurance covers a wider scope of conditions and is therefore, much more useful.
How much does it cost?
The premium is based on your profession, your age and the amount of monthly benefit that you want to be insured for.
Generally speaking, the more your job depends on the dexterity of your body, the higher the premiums will be. This may mean that premiums are higher for outdoor occupations such as camera or sound professionals, as compared to indoor or semi-indoor occupations such as directors, producers and editors.
Nonetheless, compared with other types of insurance, such as Whole Life, Critical Illness or LTC, premiums for Income Protection plans are actually quite affordable.
Given that every person should budget a portion of income for insurance protection, it’s best to get insurance while you are healthy because underwriting is stringent for most insurance plans.
Work within your budget
Many of us face budget constraints; especially if you are just starting out, have irregular income or heavy financial commitments. But this doesn’t mean that you can’t get covered.
You could choose a lower payout so that premiums will be lower. When your income increases or when your financial situation improves, you can get another plan to increase coverage. This principle applies to other types of insurance as well.
There are only a handful of insurance companies that provide Income Protection insurance. You can easily search them out online and compare the benefits and features.
Getting insurance is a huge commitment. Before making a purchase, do consult your insurance advisor.
An insurance advisor is supposed to help you map out your insurance coverage and advise on areas that you need to be covered for, bearing in mind your financial situation and future plans. It’s an important job; so do take time to find someone that you can trust.