Fear losing your job? Insure your income with these plans

Life can be full of unannounced challenges. This is why we buy life insurance. However, most people do not insure the one thing that pays for everything - our income. It can just take an accident for loss of limbs or sight to take away your income. A layoff by your employer can destroy the ability to pay EMIs on home loan. There are ways to ring-fence salary/income from such risks.

While a life insurance policy can help your family if you unfortunately pass away before securing them financially, there are still major risks if you are alive. Accidents don't come with a warning. While you may escape with your life, an accident could leave you permanently disabled.

Majority of fatal casualties are due to road travel accidents. There is also a spurt in accidents during extended weekends. M Ravichandran, president – insurance, Tata AIG General Insurance told DNA Money, "Mostly accident-related policies would have this (disability) kind of cover. Depending on the nature and degree (extent) of the disability, a fixed percentage of the sum insured is paid. Additionally, disability which may or may not be due to an accident and requires hospitalisation is also covered by all indemnity medical insurance policies."

For personal accident policies, there are no waiting periods, but medical insurance policies mostly will have a waiting period. For policies which cover disability due to an accident, there are several options available. Ideally, a policy covering higher number of disabilities is more suitable.

"Depending upon the individual's monthly expenditure he/she can choose highly flexible options, with monthly income benefits ranging from Rs 10,000 to Rs 35,000, for a period of five years to 20 years," adds Ravichandran.

Monthly income is payable only for death and permanent total disability. Temporary total disability would pay a weekly benefit to compensate for loss of income up to a maximum period as per terms of the policy.

Loss of employment: Job loss has a major effect on our psyche, besides our income and bank balance. There are policies that will, for some time at least, take care of EMIs if your fired.

Bajaj Allianz General Insurance and ICICI Lombard have policies that have inbuilt job loss cover. Try to look for termination from employment due to illness as well. "This cover is applicable only for salaried individuals," says ICICI Lombard spokesperson.

Income insurance plans are bundled with multi-year large loans typically with home loan.

Dhruv Sarin, head of health insurance, Policybazaar.com, says, "You need to pay a nominal sum to get this add on feature. It basically covers risk for payment of liabilities in case of job loss but only applies when you are fired from the job or get a pink slip. As such, these policies do not cover loss of job due to under performance, retirement and self-resignation. The insurers typically pay your three home-loan EMIs when the cover kicks in. The plan is most useful if your EMIs are large and monthly expenses are fairly high."

However, the product has its own set of limitations. Unless you are technically fired, you can't claim relief. "Employees are mostly pressurised to resign except in the situation of merger and acquisitions. Overall, if you want to park your risks outside, this add on feature is good enough to cover you for this rare scenario," adds Sarin.

STAYING SECURE

• While a life insurance policy can help your family if you unfortunately pass away before securing them financially, there are still major risks while you you are still alive
   
• Bajaj Allianz General Insurance and ICICI Lombard have policies that have inbuilt job loss cover. Try to look for termination from employment due to illness as well
   
• Income insurance plans are bundled with multi-year large loans typically with home loan, and this feature requires payment of a nominal sum. These policies do not cover job loss due to underperformance, retirement, etc