Our parents and grandparents may have been generations of savers but we may not have started out in life with the same principles. It is quite common for us to have a lot of debts and financial commitments to cope with nowadays. Long term income cover may be a useful kind of insurance policy to have for many of us.

Like many others you probably find that things are OK to fine as long as you are earning. You may even have been quite sensible about your financial commitments over the years and you may have stashed away some savings to back you up if things go wrong. But, have you thought about how you might manage financially if you lost your income suddenly?

Long term income cover is a form of insurance product that may be useful in certain situations (such as those caused by accidents or illnesses) where your salary may suddenly stop. These policies are set up to help you cope financially by paying you a replacement income. A short term policy works in the same way for a shorter time and also covers job loss.

So, for example, these kinds of policy may help you carry on meeting your financial commitments and your day to day living expenses. Let’s look at how they work:

• short term income cover lasts for between 6-12 months and may be used if you cannot work through illness, accident or unemployment. During this period you may be given a range of benefits to help you manage your money including a percentage income payment and advice on how to get back to work as soon as you are able;
• long term income cover works in a very similar way but is designed to cover longer term issues that you may experience through illness or accident. You may be able to set up this policy to last until you retire, go back to work, die or until the policy itself comes to an end.

You may think that you may not need this kind of protection because you have a work related income replacement benefit. It’s great if you do have this, of course, but you may need to check to see how this works before deciding that it may be better than setting up a long term income policy of your own.

You may find, for example, that your employer does have some benefits but that they may not last for long enough for you to be comfortable. If that is the case then you may want to follow the example of other people who then go on to set up a long term income policy that is set up to kick in when their employer benefits stop.

If you aren’t lucky enough to have employer benefits then taking out your own long term income cover policy may be something you want to consider. State benefits may see you given an extreme drop in income and, although you may qualify for some help with your mortgage costs, this may not be enough to keep the wolf from the door.

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