Income Protection Explained

Replace your income if you can not work due to illness or injury, premiums start at £5 per month.

Income protection which is also known and accident and sickness cover can provide you with a regular monthly income if you ca not work due to injury or illness. Income protection is an essential cover for most people who are working and would need to protect their income if they could not work.

Most employers do not provide any sick pay cover and those that do usually only last for 3 months. Large firms and government bodies usually offer longer period of cover but this rarely lasts beyond 12 months and in most cases will be reduced to 50% after 6 months.

So, could you pay your mortgage and bills if you could not work and your employer stopped paying you? Probably not, right? Not without substantial savings any.

There are a few options with income protection insurance policies and the benefits offered vary by insurer so it’s worth getting independent advice when choosing an insurer, remember as with most things in life cheapest is not always best. Our advisers can help understand what cover would be suitable for you and recommend a suitable insurer.

Key Features

  • You receive a tax free monthly income.

  • Cover is restricted based upon your earnings.

  • Cover can last until you reach age 65 or you can set the term, maybe 25 yours to protect your mortgage.

  • Premiums can start from £5 per month with discounts for non-smokers.

  • You choose the deferred period.

  • Additional benefits are available.

How long will I need to be off work before I get paid?

Insurers enforce what is known as a ‘Deferred Period’ with these types of policy, this is the period if which you must wait from when you make a claim until the insurer starts to pay you a monthly income. The minimum period is usually 4 week and can be extended up to 2 years.

The longer the deferred period the cheaper the policy will be for you making it more affordable. Usually the deferred period is set to match your employer’s sick pay. So if they will pay you for 3 months we will set the deferred period to 3 months so you get a cheaper policy and a continuous monthly income.

Key things to consider when choosing an Income Protection policy

Amount of Cover

This varies by insurer as there are limitations as to how much cover you can have as a regular monthly income. This is governed by law and is based upon your income but lenders will have their own rules as well. This is designed so that you cannot receive more money each month than you would have if you were still at work.

Term of the policy

How long with you need the policy for, are you covering a mortgage or do you wish to protect your income until you reach retirement age. There are restriction on how old you can be when you take a policy out and when the policy ends.d you can be when you take a policy out and when the policy ends.

Level or Increasing

Income Protection can be bought either as a level term policy or an increasing policy, this relates to the amount of money paid each month, will it stay the same each month or will it increase over time to beat the effects of inflation.

A level policy is usually taken to provide protection when you have a fixed cost such as a mortgage, whereas a decreasing policy is mainly designed to provide you with the maximum amount of cover available to you to ensure that you can continue to pay your bills for as long as you are unable to work.

Premium Protection

This benefit is an added benefit offered by most insurers, it is designed to ensure should you be unable to work due to illness or injury that you can still maintain the premiums of the policy and therefore there will be no need for you to cancel the policy. After a qualifying period the insurer will pay the policy premiums for you until you can return to work or the policy ends.

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