Updated on - 29 Dec 2025
If an individual loses their job unexpectedly, it can create financial challenges, especially when monthly income is needed to cover expenses such as rent, bills and family needs. Income protection insurance provides a steady income when a person is unable to work due to illness, injury or involuntary job loss.
This insurance helps manage daily expenses, repay loans and maintain financial stability until employment is restored. It is a practical solution to safeguard both personal finances and the well-being of dependents during periods of income disruption. Let’s take a closer look at this plan.
What is income protection insurance?
As the name indicates, income protection insurance refers to the policy that protects your income and continues to give financial coverage to your family in the case of any unforeseen circumstance. When the earning member loses their capacity to earn due to death, injury or other reasons, income protection insurance provides continuous financial coverage to their family.
Importance of income protection insurance
The importance of income protection insurance can be explained through the following points:
1. Protection against rising prices
Inflation is one of the common problems today. The prices of essential goods and services are constantly on the rise. This means you can only buy fewer things for the same price in the future compared to what you buy today. Income protection insurance protects your family against rising prices. Your income is taken care of, which means your family can live a financially secure life in the future, regardless of the rise in prices.
2. Live life without compromise
One of the main reasons why income protection insurance is important is that it allows your family to live life without any compromises. Even in the case of unfortunate events, your family doesn’t have to compromise on its quality of life. Your loved ones can continue to live the same lifestyle as before without being deprived of any benefits.
3. Coverage of debt
The earning member may have taken some loans from a bank for their personal use and also have other debts in their name, like credit card repayment. All these loans might have been taken based on their regular income. However, due to unforeseen circumstances, if the person loses their ability to earn, it can cause a huge problem when it comes to repaying these debts. This is where an income protection insurance policy can come to the family’s rescue.
What does income protection insurance cover?
The income protection insurance policy offers a range of financial benefits meant to support you and your family during unexpected health or job-related challenges. Here’s what it covers:
1. Loss of income due to job loss
The income protection insurance policy provides a fixed monthly payment if you lose your job because of illness, injury, termination, retrenchment, permanent dismissal or layoff. The payment continues for a limited period, as mentioned in your policy certificate. A 30-day deductible applies before the benefit starts.
2. Critical illness cover
If you are diagnosed for the first time with any critical illness listed in your policy, the policy will pay a one-time lump sum amount. There is a 90-day waiting period from the start of the policy before this benefit can be claimed.
3. Major surgery procedures
If you undergo any major surgery listed in your policy, the policy will pay a percentage of the amount mentioned in your policy certificate. The payout depends on the type of surgery.
4. Accidental death benefit
If the insured person passes away because of an accident, the policy will pay the full sum insured mentioned in the policy certificate. The death must occur within 365 days of the accident.
5. Permanent total disability (PTD) benefit
If an accident causes a permanent total disability that prevents the insured person from working again, the policy will pay the full sum insured. The disability must occur within 365 days of the accident.
6. Permanent partial disability (PPD) benefit
If an accident results in the permanent loss or loss of use of specified body parts, the policy will pay a specific percentage of the sum insured. The percentage depends on the severity and type of disability, and it must occur within 365 days of the accident.
7. Temporary total disability (TTD) benefit
If an accident temporarily prevents the insured person from working, the policy will pay a fixed weekly amount as mentioned in the policy certificate. This continues until recovery or until the maximum benefit period is reached.
8. Mysterious disappearance benefit
If the insured person disappears for more than 365 days after an accident involving a common carrier they were travelling in, the policy will pay the full sum insured.
9. Hospital daily cash benefit
If the policyholder is hospitalised due to an illness or accident, the policy will pay a fixed amount for each full day spent in the hospital. If the stay is in an ICU, the payout amount is doubled. Hospitalisation must last at least 24 hours to be eligible.
Note: This is an indicative list. Please read the policy wording for the complete list of inclusions.
How to choose the right income protection insurance policy?
Some points to keep in mind while choosing an income protection insurance policy are:
1. Assess your monthly expenses and income needs
Begin by calculating your essential monthly costs, like rent, EMIs, school fees and utilities. Choose a policy that can replace enough of your income to comfortably cover these expenses if you are unable to work.
2. Check the coverage and exclusions
Review what the policy includes, such as job loss, illness or disability and what it excludes. Make sure it covers situations most relevant to your profession and lifestyle. Avoid policies with too many restrictions that may limit your claim eligibility.
3. Understand the waiting and benefit periods
The waiting period is the time you must wait after a claim event (like illness or job loss) before payments begin. The benefit period is how long you will receive payments. Choose these durations based on your savings and how long you can manage without an income.
4. Compare premium costs and payout options
Look at how much you’ll need to pay in premiums and what you’ll get in return. A lower premium may seem attractive, but ensure the coverage amount is sufficient for your needs. Balance affordability with adequate protection.
5. Review claim settlement history
Check the insurer’s claim settlement ratio and reputation for timely payments. A company with a transparent and efficient claim process ensures peace of mind during emergencies.
6. Look for additional benefits
Some policies include extra benefits such as hospital cash, critical illness cover or accidental disability protection. These add value and extend your financial safety net.
7. Seek expert advice
If you’re unsure which plan suits you best, speak to a financial advisor or fill out the form on this page to get expert guidance. A professional can help you understand terms, compare plans and choose coverage that aligns with your financial goals.
When should you consider buying income protection insurance?
You should consider buying income protection insurance as soon as you start earning regularly and have financial responsibilities. It is especially important if you are the main earner in your family or have ongoing commitments such as rent, EMIs or school fees.
This cover is also valuable if you do not have enough emergency savings to support yourself for several months, or if your job involves higher risks of injury or redundancy. Self-employed individuals and freelancers, who lack employer-provided benefits like paid leave, can benefit greatly from it too.
Conclusion
Losing a job can be stressful, but having the right protection in place can make all the difference. An income protection insurance policy provides a steady financial cushion during uncertain times, allowing you to focus on recovery and finding new opportunities rather than worrying about immediate expenses.
Alongside this, having a reliable health insurance plan ensures that medical emergencies don’t add to your financial burden. If you also secure health insurance for family, you can safeguard your loved ones’ well-being while maintaining stability even when your income is temporarily affected. Together, these covers create a strong safety net for your financial and emotional peace of mind.
FAQs
1. How is income protection insurance different from health insurance?
Health insurance covers medical expenses like hospital bills and treatments. Income protection insurance, on the other hand, supplies a part of your lost income so you can continue meeting your financial commitments while recovering or finding new employment.
2. How long will I receive benefits under income protection insurance?
The duration of payments depends on your policy terms. Some plans provide benefits for a few months, while others offer longer coverage until you return to work or reach the maximum claim period.
3. Does income protection insurance cover voluntary resignation?
In most cases, it only covers involuntary job loss caused by illness, injury, retrenchment or company layoffs. Quitting your job voluntarily is usually not covered.
4. Can I include my family in an income protection policy?
Income protection insurance primarily focuses on your income replacement. However, you can complement it with a separate health insurance for family policy to safeguard your loved ones’ medical needs.
5. When is the best time to buy income protection insurance?
The best time to buy is when you are healthy and have a steady income. Getting coverage early ensures lower premiums and better protection before any unexpected event occurs.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.