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Income Protection
What is it?
This type of policy pays a monthly income tax-free, if you are unable to work due to an illness or injury.
How it works
The monthly income under the policy will usually pay about 60% of your salary and will be paid until you are fit enough to return to work or reach retirement age.
What you need to know
State benefits aren’t generous and only a few employers will continue to support their staff through a long illness, so income protection policies can help families through difficult financial times. Again, you can choose the date at which the policy would pay out in the event of a claim (deferred period). Policies that pay out sooner (shorter deferred period) will have a higher premium.
Do I need income protection?
Where your finances are concerned, it is reassuring to know you are protected and able to pay important bills while unable to work for a long period of time.
In some circumstances you may not need income protection. Some companies offer sick pay and employee benefits which are useful to fall back on and can give you an income for 12 months or more.
Short term vs long term income protection
Short term income protection insurance policies usually only pay out for one or two years. They will cover a proportion of your income, until you are well enough to work again. This can be very useful if you are a renter, a young person or currently earning a low income.
Most long term income protection policies have a minimum of 5 years, with some allowing you to claim more than once. Although long term protection comes at a higher cost, you will potentially be eligible for an increased pay out and can be covered until you retire.
When can you claim income protection?
There is often a waiting period before income protection payments start; this will be pre-agreed when you put in an application. This is also known as a deferred period and can vary depending on your circumstances, however the longer the period, the lower your monthly premiums will be. Once the deferred period has passed, your monthly payments will commence. This could be from the date when sick pay from your employer ends or when relying on personal savings is no longer sufficient.
Questions & Answers
Q: Does income protection cover the self-employed?
A: This type of policy pays a monthly income tax- free, if you are unable to work due to an illness or injury.
Q: Will income protection cover mortgage repayments?
A: Mortgage payment protection is a form of income protection and can cover your monthly repayments in full while you are unable to.
Q: Does income protection cover redundancy?
A: You will be able to insure yourself against involuntary redundancy by taking out a short term income protection policy. This can cover a proportion of your income and can take the pressure off while you look for another job
Looking for income protection?
Get in touch with us today and we will help and advise you through the process
