Difference Between Income Protection Insurance & Life Insurance

Difference Between Income Protection Insurance & Life Insurance

A common struggle that people usually face is managing their income properly. Even after a good income, many people find it tough to perfectly handle the essential outgoings, like loans, rent, mortgages, etc. It also becomes tough for us to save a good amount of money for the safe and bright future of our kids and loved ones. The best thing that helps us with making the right use of our income is none other than insurance.

Buying a good insurance policy help you get a variety of benefits. It does not just help you make the right investment but also keeps you and your loved ones' future safe and financially sound. But when it comes to buying an insurance policy, people usually get confused between different types of insurance policies.

While some people prefer life insurance, others choose income protection insurance for different reasons. Knowing the difference between both help you make the right decision.

Some common things that make income protection insurance and life insurance different from each other are listed below.

Life Insurance Life insurance is a type of insurance policy that covers a lump sum amount. This insurance policy pays a lump sum to your family members or partner, i.e. the nominated beneficiaries, after your death or when you become terminally ill. It covers the amount that is paid to the beneficiaries only when your die or become terminally ill during the term of the policy.

In life insurance, usually, a tax-free lump sum amount is paid to the beneficiaries. The policy provides you protection during your lifetime. The amount of compensation that beneficiaries get from the insurance policy can be used for paying off their repayment mortgage, clearing debts, covering everyday expenses, and/or covering funeral expenses.

Income Protection Insurance Income protection insurance is a long-term insurance policy that keeps you protected when it becomes tough for you to continue your job due to an injury or illness. Income protection insurance includes a monthly sum. The amount in the form of compensation that you get from income protection insurance is provided to you only until you are fit enough to return to work.

The purpose of income protection insurance is to cover some of the lost earnings. It helps you bear the cost of medical expenses and other day-to-day expenses, by providing you with some amount that you can easily use when not working due to an injury or illness. This type of insurance pays out when you need it. However, the amount you get also depends on the deferral period chosen by you while buying the insurance policy.

In life insurance, you are allowed to choose the amount when purchasing the policy. But income protection insurance includes 75% of your monthly income. The life insurance is for beneficiaries. With it, they can pay for mortgage payments, debts, living expenses, and more. But income protection insurance is for you. With it, you can pay your everyday expenses and bills, etc. Choosing between both insurance policies is quite tricky. But hiring experts in financial planning in Melbourne help you make the right decision. They not just provide you with the best knowledge but also help you save time and money.

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