Quick guide to income protection
Income protection, also known as sick pay insurance, can be a lifesaver if you are too poorly to work.
By having this type of cover in place, you wouldn’t need to worry about paying for the essentials in life.
What is income protection?
Income protection is a type of life insurance policy that covers your income, if you were unable to work due to illness or injury.
This policy can cover up to 70% of your monthly earnings, so if you don’t have much money in savings, this cover could make all the difference.
Is income protection worth it?
Yes!
If you have little to no savings, and/or you’re in employment then an income protection policy is definitely worth it (in our opinion at least).
What does income protection cover?
There are so many different types of life insurance nowadays - it can feel overwhelming.
You have a level life insurance policy which could pay out a lump sum if you were to pass away and critical illness cover which pays out a lump sum if you were diagnosed with a defined critical illness.
Income protection is a little different. Not only can this cover pay-out whilst you’re still alive, it also doesn’t just cover you for one set thing. Instead, income protection covers you for illness and injury in general.
How long can this policy cover you for?
Your income protection policy will normally be recommended to cover you until retirement age so that you’re covered throughout the entirety of your working life.
However, it all depends on your unique circumstances and affordability - both of which will be taken into account.
What happens if you make a claim on your policy?
If you make a valid claim on your long-term income protection policy, your regular payments will continue until you return to paid work or your policy expires, whichever comes first.
What can you use your income protection payments for?
The regular monthly payments you’ll receive from your income protection policy can be used for so many different things:
- Paying the bills
- Food shopping
- Childcare costs
- Toiletries
- Household products
- Petrol money
- Vets bills
These are just a few suggestions, at the end of the day, the money is yours to do whatever you want with.
Is income protection taxable?
As long as you pay your own policy premiums, if you couldn’t work due to illness or injury, you’ll be happy to know, the regular monthly payouts that you’d receive from your income protection policy will be free from tax.
How much does this policy cost?
The price for any type of life insurance will always vary depending on a few different circumstances and it’s no different when it comes to income protection.
When you take out your income protection policy, one of our experts will get to know you, so they can work out your life insurance needs. The price of your monthly premiums will be determined by several different factors, such as:
- Your medical history
- Age
- Smoker status
- Your job
- BMI
- Your lifestyle choices
- Your family's medical history
Everyone’s information will be different which is why life insurance is never one size fits all.
Does income protection cover redundancy?
Unfortunately, no. Income protection insurance only covers health related absences from work. Quitting your job, voluntary redundancy, or being fired would not be covered by your policy.
What is a deferred period?
With any income protection policy, you will have a deferred period.
The deferred period, also referred to as the ‘waiting period’, is the period of time that you will have to wait between first being off work and receiving your payments. Your deferred period can range all the way from 4 weeks usually up to 52 weeks.
This period is an important part of your income protection policy, as it determines how soon you will begin to get the pay-outs from your policy.
Do I need income protection insurance?
There are so many reasons why an income protection policy could be right for you and one of the main benefits of having this policy, or any type of life insurance, is peace of mind.
If you’re in employment and have little to no savings, an income protection policy could make all the difference to your lifestyle if you’re off work and also your short term future.
The best way to find out if you need this type of cover is by speaking to one of our life insurance experts. Once they have assessed your needs and wants, they can work out the type of cover you need and the level of cover. To get started with your life insurance journey today, click the button below.