Income Protection Insurance is an insurance policy that pays you a tax free weekly or monthly payment direct to you if you were unfortunate enough to be unable to work due to accident, sickness, injury, unemployment or redundancy.
Income Protection Insurance gives you and your family peace of mind, so you can rest assured that your regular monthly bills, such as mortgage, rent, utilities, loan repayments and groceries, are taken care of should you no longer receive a regular income due to unexpected redundancy or accident and sickness.
This type of insurance is one of the most important insurance policies available, as it will maintain your lifestyle at a time when stress levels are at their highest. Income protection takes a huge weight off your shoulders, knowing that there is money coming into the household to pay the bills, and allows you the breathing space to look for your next career path. If you are signed off work due to an injury or illness, income protection can give you the time you need to recover at the correct pace, and not be forced to rush back to work just because you have no sick pay entitlement outside of your statutory sick pay.
With Job Seekers Allowance paying less than £80 per week, and Statutory Sick Pay paying less than £95, they are no longer a viable safety net to fall back on if the worst happens. Hence, Income Protection Insurance is becoming more and more popular among all ages and demographics throughout the UK.
Income Protection Insurance covers you for loss of income. There are three types of income protection covers – accident & sickness only, unemployment only and the combined accident, sickness, and unemployment cover. The accident & sickness policy covers you for loss of income arising from accident or sickness. There are over 40 insurers and over 100 different variants to choose from. The types of insurers range from specialist income protection insurers such as British Friendly, Shepherds Friendly, Cirencester Friendly, Holloway Friendly etc. to mainstream insurers such as Aviva, Legal & General, Royal London etc. to Lloyds of London. There are policies that are medically underwritten before the policy starts and policies where a detailed underwriting and assessment is carried out at the point of claim. In terms of claims, some insurers provide only up to a maximum of 12 months and some will pay until your retirement age.
The unemployment only cover will pay if you are made involuntarily redundant. Most of these policies will pay up to a maximum of 12 months. These policies will be more relevant if you have your sick pay is covered by your employer.
The hybrid policies cover all three – accident, sickness, and unemployment. They are popular as they cover most of the usual eventualities for loss of income. Most of these policies will pay you up to a maximum of 12 months.
While income protection insurance cover is not complicated, it is efficient to speak to a specialist advisor as they will have the knowledge of all the policies and can compare them for you. Also, if you have a fixed monthly budget, a trained advisor will help you to find the best fit to meet your specific requirements.
Alternatively, if you are confident about what you need you can get your quotes online and apply straightaway.
Income insurance is a very simple policy to understand, once you know the process. A great starting point is to check your eligibility. The most important factor is that you need to be working, either employed or self-employed, and earning a regular income. The amount you currently earn will is an important factor in calculating the monthly benefit amount you will receive if you make a claim.
Different insurers will have different eligibility criteria that they deem acceptable to purchase their policies. When speaking to an advisor, or applying online, you will need to confirm certain information to make sure that you are not only eligible to purchase, but more importantly, eligible to make a claim. For example, you may need to confirm that you work more than 16 hours a week, a UK resident, or that you are registered with your local GP or doctor.
Once you have confirmed that you meet the individual insurers criteria, you will need to complete an application for your chosen policy, which can either be completed online, or over the phone with one of our trained consultants who specialise in income protection insurance. If you have any questions regarding your policy, our experts are always more than happy to answer any queries you have to make sure you fully understand the ins and outs of your policy.
Your cover will begin when you start paying your monthly premium. With Best Insurance, you can cancel your policy at any time, and are not tied in to an ongoing contract, however as soon as you stop paying your monthly premium, you will no longer be covered. For unemployment, you will also have an initial exclusion period, which the period of time after your policy goes live in which you won't be able to make a claim and varies depending on your insurer.
When your initial exclusion period is up, you will then be eligible to make a claim should you find yourself out of work due to accident, sickness or redundancy. Details on how to make a claim will be found in your policy documents, and you will be asked to provide evidence to support that you are no longer working and your loss of income. The insurer will assess your situation, and if you meet the criteria of your chosen policy, you will start receiving your tax-free monthly benefit amount until you return to work, or until your benefit period is up. This can be up to 2 years of redundancy, or until age 70 for accident and sickness.
There are many different types of Income protection policies available from many different Insurers, to give you some examples Lloyds of London, Legal and General, Liverpool Victoria, Aviva, Vitality would be some of the more well-known Insurers that offer Income Protection, however you also have smaller specialist providers like Shepherds Friendly, British Friendly, The Exeter or Munich Re who also offer Income protection cover.
It is extremely common for certain Insurers to specialise in a certain sector of Income Protection, for example Accident and Sickness, or Accident, Sickness and Unemployment or short term or long-term Income Protection.
The Income Protection Policy could be linked to a mortgage, loan, credit card or rent payment for example or linked to all your monthly commitments including all your bills, or simply linked to your Income.
Some policies will pay out in a claim for 12 months generally as a minimum or it could pay out for 2 years or even ongoing until you reach the age of 70 years old.
This is where it can become a little confusing, so we prefer to keep it simple by asking customers what is worrying them, are they worried about Accident and Sickness, or Unemployment or all three, Accident Sickness and Unemployment.
Understanding what you are most concerned about and what is going to cause you the biggest issue financially is by far the easiest place to start and will ultimately lead you to buying the correct policy for your requirements.
So, the different types of Income Protection Policies available are Accident and Sickness, Accident, Sickness and Unemployment and Unemployment Only.
Short term and long term income protection are industry terms used to describe the length of time your policy will pay out your benefit amount when making a claim. Each policy will have it's own predetermined benefit period, which will tell you whether or not the policy is short term or long term.
The general maximum pay out length in a claim for Unemployment is 12 months, hence all Unemployment policies are deemed as Short Term. If you are thinking of purchasing an Income Protection policy that covers you for Accident, Sickness and Unemployment, then this will always be known as a short-term income protection plan. After 12 months of unemployment, if you have not found another suitable line of work, your claim pay out will stop. The maximum pay out length for a Short-Term Income Protection policy whether it is Accident or Sickness only or whether it is Accident, Sickness and Unemployment or Unemployment only is 2 years.
There are three main options of cover to consider when purchasing income protection insurance. Understanding these terms will ensure you purchase the right policy for your requirements.
Benefit Amount This is how much the claim pay-out will be each week or month, should you find yourself out of work for Accident, Sickness or Unemployment. The maximum amount you can claim varies on your income and which insurer you go with. The maximum amount is generally 70% of your annual income, or capped at a certain amount set by the insurer. For example, if your annual income is £30,000, the maximum benefit amount could be £1,750 per month, or it could be as low as £1,250. When choosing your benefit amount, it is wise to look at your lifestyle and how much you will need to get by as this will effect your monthly premium.
The Waiting Period This is how long you need to wait before the claim pay out begins. The waiting period can also be called the deferment period or excess period, dependent on the insurer. The waiting period offered is different for Accident & Sickness to Unemployment. With an Accident & Sickness policy you can choose to be paid within 3 days, 1 week, 4 weeks, 3 months, 6 months or 12 months. This could fall in line with any sick pay you are entitled to, or the period of time you feel you could support yourself. For Unemployment, the quickest waiting period is 30 days, sometimes called Back to Day 1, or 60 days or 90 days, which are more common.
Initial Exclusion Period The Initial Exclusion Period is the period of time after your policy goes live before you are eligible to make a claim and is only applicable to Unemployment insurance. This is a one-off period which safeguards the insurer from individuals purchasing a policy then making a claim instantaneously for unemployment. There is a choice, for instance, 60 days, 90 days, 120 days and finally 150 days. The longer the wait, the cheaper the cost of the policy. If the individual is made aware their job is at risk within this initial exclusion period, then you will be able to immediately cancel your policy, as your claim will no longer be valid.
All three of the above factors will affect the cost of your monthly premium. Keeping the benefit amount lower and increasing the waiting and initial exclusion period will reduce cost.
It is essential to understand the benefits of the Income Protection Product you are looking to purchase. The different benefits available depend on the Insurer and policy being purchased, some policies are feature rich others are basic, the price will always reflect this. To give an example of a feature or benefit rich Unemployment policy then you will find the following included:
Back To Work Support A free service that helps with interview techniques, CV writing and general help getting back into the work place.
Legal Protection A separate policy that covers employment tribunals, identity theft, consumer disputes, and prosecution expenses.
Waiver of Premium Waiver of premium means you will not be required to continue paying your monthly premium should you fall into a claim.
Reduced Hours If your employer reduces your working hours, then the % reduction can be claimed upon meaning a percentage of the shortfall is covered.
Waiver of IEP When transferring your cover from one insurer to another, then this means you won't have to go through the initial exclusion period again.
Probation Period Cover Probation period cover is generally excluded, however you will find certain feature rich policies that will cover probation periods.
Gaps in Employment If you change jobs after you have purchased a policy, you should ensure that when taking a break between jobs that you are still fully covered.
These are essential points to consider when choosing your unemployment policy.
For Accident and Sickness insurance, the additional benefits can be extremely important and comprehensive, and offer support at one of the greatest times of need. These include:
Hospitalisation Benefit This provides an additional financial pay-out based on the length of time you are in hospital on top of your income protection claim.
Fracture Cover Fracture Cover will provide a one-off tax-free payment for any fractures incurred, check policy documents for pricing.
Global Treatment Global Treatment provides cover wherever you are in the world, excellent if you are a frequent traveller for work or pleasure.
Cancer, Speech and Cardiac Support There are independent support facilities for cancer, heart problems and speech issues that could be associated with strokes.
Guaranteed Insurability Option This means you can secure your claim pay out amount against any reductions in income after you have purchased the policy.
Career Break If you wish to take a year out as a career break or a sabbatical, then your cover will not cease if the policy has the career break benefit.
Death Benefit and Bereavement Counselling Should you find yourself in the unfortunate position of losing a loved one, some of our policies will not only provide a financial pay-out, but also offer support and provide help or bereavement counselling throughout the difficult chapter.
Other Benefits There are a range of medical and financial help that the insures provide for obtaining second medical opinions, if you need carers or care assistance, accessing the best doctors in the world and any legal issues you may also be subject to which is related to your injuries.
These are essential points to consider when choosing your unemployment policy.
If you are currently in employment or self-employed, then you should already be considering income protection. Our experience and data shows us that more people insure their pets and belongings than their income, the one thing that pays for the lifestyle we lead.
The most important question to ask yourself is: how would your life be affected if your lost your income? Not only your life, but that of your loved ones. Do you have savings you can rely on, and how long will those last? Will your partner and family be able to get by without your support? If you were to suffer with an unexpected accident or injury, would you be able to recover in peace knowing that your bills and outgoings will still need to be paid? If you have a mortgage or are renting, will you be able to cover your costs until you're back in work?
Being able to answer these serious questions can be the difference between being prepared and supported during some of the most stressful situations life can deal you, or losing your house and getting in to significant debt. We understand it is human nature to think "it won't happen to me", but the sad reality is that this happens all too often, and we all know somebody affected by a serious illness or injury, or has been unexpectedly made redundant.
It also important to remember that income protection policies operate with an initial exclusion period, which can be up to 120 days, so the sooner you take out your policy, the sooner you will eligible to make a claim if the worst was to happen. Don't let it be too late.
If you are eligible for income protection insurance, then yes, as it is one of the most important insurance products you can invest in. If you are earning a regular income, it is essential that you cover this to protect yourself from unexpected redundancy, accident or sickness.
Regardless of your age, or the type of job you have, unfortunately everyone has bills to pay. From mortgages, rent payments, car finance, credit cards, loans, mobile phone contracts, to regular bills such as electric or gas, food shopping, and travel expenses, clothing and entertainment.
All the above will be impacted if you go without earning money for any period of time, even the shortest period can put us into financial distress. Being out of work for whatever reason is a stressful time, it can become even more stressful if the added pressure of financial worries is added.
Many customers advise us that they do not need protection because their husband, wife or partners work or that they have savings in place to get by for a month or two, however this is not the way to assess your situation. You should be looking clearly at your income and expenditure, how much you spend each week or month. You should be looking at how much you are saving and or putting aside for rainy days, you should then be looking at what sick pay does your employer pay you or how much should you receive as statutory sick pay or from a job seekers agreement. Once you have looked at all of this then you should be able to estimate how long you can survive from your own resources before your lifestyle is impacted. Unfortunately for most of us this this period will be days not weeks and certainly not months, hence making the decision to protect your income against the unforeseen should be an immediate consideration.
The cost of income protection can vary greatly depending on multiple factors, and the type of policy you wish to purchase. The price you pay for your insurance is called your monthly premium. Here are the main factors that will affect your premium.
Type of Insurance Are you looking to cover yourself against accident and sickness, or just redundancy? Or perhaps you want to be covered for both accident, sickness and unemployment. Your decision will have an impact on your monthly premium, however the higher the cost, the more comprehensive the cover.
Your Benefit Amount How much cover you require will also affect the cost of your premium, which is why we recommend really thinking about how much you need to live if you had to replace your income. Remember, unlike your salary, this money is tax free and you can also claim Job Seeker's Allowance or Statutory Sick Pay.
Excess Period If you would like to receive a payment immediately, or within the first week or two, then this will be more expensive than waiting for 4 weeks or 12 weeks, as the longer your excess period the lower your monthly premium, as the risk decreases for the insurer the longer you decide to wait.
Term Length The policy will also cost more, or less, depending on how long you decide to receive the payment. If you choose a policy that pays out until you reach age 70 for accident and sickness, then this will cost more than a policy that pays out for 12 months for unemployment.
There are finer points that can change the cost of your premium, such as your age, if you smoke or use nicotine-based products, your health and medical history, or even your lifestyle pursuits. This is the real advantage of income protection, as unlike home insurance or car insurance, it is much more specific to you and your lifestyle, which makes it much fairer and much more cost effective.
As you can see there are a lot of factors and things to consider when purchasing your policy, which is why we have specialist protection consultants on hand to speak to you and answer any questions you may have, and find the best price available for your requirements.
Purchasing Income Protection is simple once you understand your requirements. Once you have made the decision to protect what is, in our opinion, the single most important insurance policy any individual can have, then you must conduct sufficient research before you buy.
A great way to start is by comparing the different types of policies that are available within the market, and most importantly, understanding what the policy covers. As with all Insurance policies, the terminology used is a key factor. Once you have all this information, you can move forward and start comparing products.
Whilst price is a key factor when choosing your cover, do not be too hasty to rush and buy the cheapest. Generally speaking, the more expensive the policy is, the more comprehensive your cover is. You should always compare the product benefits and terms and conditions, as you may find that paying an extra few pound can make a big difference if you were to make a claim.
To start comparing quotes, you can use our Get A Quote page which will instantly generate a variety of quotes for you to compare online, or you can speak to one our trained experts, who are more than happy to do the hard work for you. Our Income Protection specialists have a wealth of knowledge and experience, and will help find you the best policy available to match your budget and requirements. Simply call us free on 0330 330 9465.