Income Protection Insurance
Income protection insurance is designed to provide financial support if you’re unable to work due to illness or injury, resulting in a drop in your income. This type of policy is especially important for the self-employed, who wouldn’t be eligible for sick pay.
What is income protection insurance?
Income protection insurance provides regular payments that replace part of your income if you’re unable to work due to illness or an accident. It pays out until you can start working again – or until you retire, die or reach the end of the policy term – whichever is sooner. It’s not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness.
Why do I need income protection?
When we’re unable to work due to illness or an accident, you might assume that your employer will continue to give you some level of income.
In reality, however, employees are usually moved onto Statutory Sick Pay within six months or less. Very few employers support their staff for more than a year if they’re off sick from work. Check what your employer will provide for you if you’re off sick.
Depending on the level of savings you have, the loss of an income can soon leave you unable to pay essential household bills, such as mortgage/rent and utilities. It can be particularly difficult if you’re self-employed and so have no sick pay to fall back on.
You can also choose short-term income protection insurance, which will provide a monthly sum over an agreed upon period of time, in the event you were to lose your main source of income due to an inability to work e.g. illness or injury.
The benefits of income protection insurance
- Regular payments: Provide ongoing payments that replace part of your income if you can’t work due to illness or injury.
- Income coverage: Typically covers 50% to 65% of your income if you’re unable to work.
- Flexible protection: Covers most illnesses and injuries that prevent you from working, whether short or long-term.
- Multiple claims: You can claim as many times as you need while the policy is active.
Income protection policies usually have a waiting period before payments begin. Common waiting periods include 4 weeks, 13 week, 26 week and up to 1 year
- Tip: The longer the waiting period, the lower your monthly premiums will be.
Could you manage without income protection?
Without a steady income, it can become difficult to cover essential expenses, such as:
- Mortgage or rent payments.
- Utility bills.
- Everyday living costs.
Your savings may offer some short-term support, but an extended period without income can quickly create financial strain.
Do you need guidance?
If you’re unsure which type of income protection is right for you, our expert advisers are here to help you find the best solution for your circumstances.
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