The ability to earn a decent living ultimately determines how good or bad our lives are. Any unexpected changes in our income flow will have a significant impact on how we live on a daily basis. Income protection is a strategy that ensures you have extra money for monthly expenses when you don’t have income, and that you develop more skills to make yourself more competitive in the job market. It also means that you should always possess a backup cash flow for the tough times when you’re unemployed. That way, you’ll have enough money to cover your living expenses while you sort things out and look for a new job or start a new business.
How to Protect Your Income?
Save up for an Emergency Fund
We’ve all heard that paying for things that require a significant amount of money, such as medical emergencies, tuition, past-due bills, and home or car repairs is especially difficult when you don’t have a consistent source of income. Having money in a savings account for an emergency fund is important because it allows you to pay for time-sensitive obligations without having to borrow. Begin putting aside a portion of your income for an emergency fund by multiplying your monthly income by three to six.
Invest in Income Protection Insurance
These are insurance products that provide monetary benefits if you lose your job or your ability to earn an income temporarily. Most major insurance companies provide them, with prices varying according to premium, benefits, and included features. This will assist you in meeting your family’s day-to-day living expenses, such as utility bills, education, or existing loans.
Sean Martin D. Plantado, head of the customer service for Digido.ph, claims that any life and health insurance protects you as long as you are able to pay the premiums on time. However, if you miss a payment, the policy becomes invalid and won’t protect you.
Invest in Building Passive Income
The goal here is to create a sustainable income source that makes sense for you, from the type of passive income you choose to the time and effort required to do it. Dividend investing, rental properties, cryptocurrency staking or NFTs, selling digital products, building or buying and selling websites, fixed income securities, and business franchising are all examples of passive income ideas.
Upskill & Reskill
To increase your chances of finding a job quickly, you should both enhance your current skill set and also learn some new ones. Upskilling is learning new things to help you improve your current skill while reskilling is learning new skills for a new career path. This is significant because a good income protection strategy should include methods and means to ensure a high level of job market competitiveness. Taking courses, internships, training, mastermind groups, workshops, seminars, and reading books and other materials related to your chosen skill are all examples of ways to upskill or reskill.
Staying healthy is critical to protecting your income. It’s especially important in this age where we easily burn out physically and mentally. If you get sick, all of your best-laid plans to earn more and protect your income will be for naught. Remember to sleep well, eat healthy, and exercise. Relax and unwind, and allow your body to recharge.
Tips When Considering Income Protection Insurance
Be honest about your current health status. In case you have medical conditions, such as diabetes, asthma, or other health issues, you must disclose these to your insurance company. Also, try to choose a plan that completes most of your needs. Be sure that you comprehend all the terms of the policy, what it does cover and what it doesn’t cover, how much money you can receive each month.
Update or renew your policy as needed. This means reviewing your policy every three years to make sure that your policy continues to meet your needs. You can opt to terminate your policy within 30 days or give written notice to your insurer if you decide to cancel your policy.
Always take a look at the coverage and duration of the policy. Basic income protection covers salary and savings, whereas more comprehensive plans may provide larger monthly payouts to cover things like a mortgage, loans, and other similar expenses which also come at a higher monthly premium.
Another issue you should consider is the length of coverage. Most plans last several months, whereas longer policies can cover up to a year or more. Take note of your financial situation when choosing an income protection policy. In the case, you possess some savings and an emergency fund, a shorter and more cost-effective policy could be a smarter option. Otherwise, if you don’t have an emergency fund or some savings for unexpected situations, a more comprehensive and longer policy may be best for you.
Income Protection Insurance can help you during unexpected events to cover your living expenses while you are out of work for medical treatment until you are able to return to work, and even if you die. During uncertain times, your source of livelihood is not stable. This is why you must make sure that you have a safety net such as income protection insurance.
Arun is an avid blogger and business expert. He’s been in business from the moment he finished school and hasn’t stopped growing ever since.