What is Income Protection Insurance?
Income protection insurance is a long-term insurance policy to help you if you cannot work because illness or long term injury.
- It potentially replaces part of your income if you cannot work because you have become ill or disabled, normally 50% – 75% of income.
- It pays out until you can start working again, or until you retire, you die or you reach the end of the policy term – whichever is sooner.
- There’s a waiting period before the payments start. You generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer the waiting period, the lower the premiums.
- It covers a wide range of illnesses that leave you unable to work, either in the short or long term (depending on the type of policy and its definition of incapacity).
- You can generally claim as many times as you need to, while the policy lasts.
Speak to one of our advisers
With income protection insurance, everything depends on getting the right policy – so it’s best to get advice from us before committing to this type of protection.
This type of policy is not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness specified in the policy provisions.
It is not the same as short-term income protection, which also pays out a monthly sum related to your income, but only for a limited period of time (normally between two and five years) and can cover fewer illnesses or situations.
Ask yourself ‘do you need it’?
According to the Association of British Insurers, one million workers a year find themselves unable to work due to a serious illness or injury.
It doesn’t matter whether or not you have children or other dependants – if illness would mean you cannot pay the bills, you should consider income protection insurance.
You’re most likely to need it if you’re self-employed or employed and you don’t have sick pay to fall back on. You should find out from work exactly what the sick pay benefits are and when they stop.
How much does it cost?
How much you pay each month will depend on the policy and your circumstances. Usually income protection insurance covers a wide range of illnesses and situations and has the potential to pay out for many years.
The cost of a policy will vary based on a number of factors, some of which include:
- Whether you smoke or have previously smoked
- Health (your current health, your weight, your family medical history)
- The percentage of income you’d like to cover
When applying for any type of insurance, including personal protection, it is very important to disclose any requested or relevant information as failure to do so may adversely affect any future claim.
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