Income Protection Insurance
Should you suffer an accident, sickness or unemployment, Income Protection will cover your monthly income.
Income Protection will cover your core monthly financial commitments such as your mortgage/rent, bills and food.
Every working adult should consider Income Protection.
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What is Income Protection?
All UK adults insure their cars and homes however almost all forget to protect what pays for it all, our earnings.
As the level of government support available is low and with fewer employers offering long term sick pay above and beyond Statutory Sick Pay, an income protection policy is more important than ever.
Do I need it?
As detailed by the Department for Work and Pensions (DWP) there were over 370,000 people claiming Employment and Support Allowance (ESA) for incapacity in August 2009.
With ESA standing at only £95.15 per week, Income Protection Insurance allows many individuals to maintain their standard of living should they lose their income due to sickness or injury.
How does it work?
Should you suffer sickness or injury that prevents you from working your Income Protection Insurance will begin to pay a monthly benefit after your chosen deferred period either until the policy ends or you return to work.
Income Protection is designed to provide cover against the risk of accident, sickness and unemployment, with policies paying out for a maximum period of 24 months.
Income protection FAQs
What is a deferred period?
The deferred period (also referred to as a waiting or deferment period) is defined as the amount of time for which you need to be off work for the policy to start paying its benefit to you.
The “average household” are able to maintain their standard of living for 4 week period before financial issues may cause issue. The most popular deferred period for customers is 4 weeks before the plan would start paying out.
It is very important to set an appropriate deferred period as the monthly premiums can come down significantly as this period is extended. Furthermore, if you are still receiving an income from your employer due to illness, sickness a longer deferment period will offer a cheaper premium.
Deferment Period for Accident and Sickness Cover
A typical deferred period for accident and sickness cover will depend on whether you receive any period of full sick pay from your employer.
If you employer were to pay two months of full sick pay it usually makes sense to set the waiting period equal to this length of time. Upon making a claim the policy will not usually start paying out until you are no longer receiving full pay from your employer.
Deferment Period for Unemployment Cover
The waiting period for unemployment protection it is important to consider how much redundancy pay you would receive and the level of savings you have.
If you would have enough capital to survive for a period of time due to redundancy pay (usually paid as a lump-sum upon being made redundant) it may make sense to extend the deferred period in order to bring the monthly premiums down.
I am self-employed can i get income protection?
As a self-employed individual you would most certainly eligible for income protection insurance. When making a claim you may need to provide information to confirm your earnings history for a certain time period.