Income Protection Insurance
Families Protected
What is Income Protection Insurance?
If you are worried about losing your income if you’re ever to be off work due to accident or illness, you need income protection insurance. Income protection insurance offers a replacement income if you’re unable to work, usually due to illness or injury. There are several types of income protection insurance, offering short and long-term cover.
Income protection insurance pays you a regular income and it will continue until you return to paid work or retirement. Income protection insurance can also be referred to as permanent health insurance.
The amount you can claim won’t replace the exact amount of money you earned previously before you had to stop work. With an income protection insurance policy, you can expect to receive about half of your earnings before tax.
At Life Expert, we can help find you the best income protection insurance that is most suitable for you based on your personal circumstances and budget.
Do I Need Income Protection Insurance?
To answer that, consider if you would be able to make ends meet if you were to lose your job due to illness or an accident. Without a steady income, it would be easy to deplete your funds while still having to pay for your rent or mortgage, utilities, food, and travel expenses. The security of a consistent income to support your monthly expenses could be provided by income protection insurance from Life Expert.
If you’re self-employed, or you’re employed but only have statutory sick pay (SSP) to fall back on, income protection insurance could offer a vital safety net.
Even if you are eligible for statutory sick pay and have no dependents, you should still think about getting income protection insurance in case an accident or illness prevents you from working and having to pay your bills.
Consult with a financial consultant like Life Expert if you’re uncertain about whether income protection insurance is appropriate for you. We can walk you through your options and provide advised guidance to get you the most suitable income protection insurance policy within your budget.
What Does an Income Protection Insurance Policy Cover?
The sort of income protection insurance policy you purchase will determine what is covered. The kind of policy and insurance company you select will also affect how long you’re covered (the policy’s “term”).
- Short-term Income Protection: If you’re out of work temporarily due to an injury, illness, or unemployment, such as a broken leg or layoff, short-term income protection may be able to provide you with coverage. Typically, policies protect you for a year or two.
- Long-term Income Protection: If you become critically ill or permanently incapacitated, long-term income protection, commonly known as permanent health insurance (PHI), will safeguard you against accident and illness. Unemployment is not covered by it. Long-term income protection insurance could give you a consistent monthly income if you are unable to work again until you retire or the policy term expires, whichever comes first. To find out the specifics, check with your provider.
Contrary to popular belief, income protection insurance is distinct from payment protection insurance (PPI). PPI will only pay down a specific debt if an illness, injury, or unemployment prevents you from working. For instance, it might pay for your loan, mortgage, or credit card bills. You can utilise the monthly income you receive under income protection as you would your regular income, tax-free.
How Does Income Protection Insurance Work?
Income protection insurance typically covers around 50% to 70% of your gross monthly income. Check the specifics of the insurance before assuming anything. Some policies will cover both pay and income from commissions, bonuses, and dividends related to the job.
Your insurance provider might continue to give you a partial income until you return to work full-time if you are able to return to work but are working fewer hours than you were before you were hurt or became ill. Check your policy once more for details.
Policies have a waiting or deferral period, which is the interval between getting sick and when you can make a claim. Usually, this takes at least a month. Your insurance will cost less the longer the waiting period is.
If you are eligible for SSP, you may simultaneously make a claim on your income protection policy and SSP. However, the fundamental notion is that when your sick pay expires, your insurance coverage takes over.
How Much is Income Protection Insurance?
This really depends on your personal situation and the insurance policy you choose. There are many things that could affect the cost of your income protection insurance. Here are some examples:
- Salary– put simply, the more you earn, the more you’re looking to cover, which means your protection repayments will be more expensive.
- Job– the riskier your job is considered, the higher your premiums are likely to be. Builders and mechanics are likely to pay more than accountants and office workers, for example.
- Monthly outgoings– you’ll need sufficient cover to pay your existing bills if you’re unable to work.
- Debts– if you have outstanding loans, credit or other debts, you’ll need enough cover to pay these costs.
- Marital status– if you have a spouse, civil partner and/or a family who are financially dependent on you, you may need more cover.
- Age– as you get older, you should expect to pay more for your monthly premiums.
- Health– if you have pre-existing health conditions, you could be more likely to make a claim and so should expect to pay more.
- Lifestyle– if you take part in extreme or adventure sports, you’re more likely to be injured and need to make a claim.