Have you ever worried yourself about what would happen if you were unable to work due to an accident or illness? How would the bills get paid? How would you and your family manage? Income Protection is a policy designed to pay-out a monthly tax free sum to cover your outgoings if you were to find yourself out of work through no fault of your own.
Income Protection is designed to pay out monthly sums to cover your regular outgoings in the event of you being incapacitated and unable to work. The Insurance company will cover you for a maximum of 65% of your gross monthly earnings. The reason that they will only cover you for 65% is that the pay-outs are tax free and you will still be eligible to claim SSP (statutory sick pay) as well as any state benefit you may be eligible to.
Income Protection is designed to cover loss of employment due to redundancy or any accident or sickness that will keep you from performing your current occupation. Each insurer has differences in their policies but as a rule of thumb, if your doctor signs you off of work for any reason you will be eligible to claim on your policy. Since the downturn in the economy, many insurance companies have stopped offering redundancy cover as part of their Income Protection package so it is important to check if this is included when considering a policy.
Q. Can I get Income Protection if I am self-employed?
A. You are able to obtain Income Protection if you are self-employed but not every insurer will take you on.
Q. How long will an Income protection policy cover me for?
A. this will vary from insurer to insurer but most companies will cover you up until the age of 65.
Q. How long will the policy pay out for?
A. If you have a comprehensive policy in place, the plan could pay out for the entire term of the policy if you were unable to return to work.
Q. If I claim on my Income Protection policy, will I still have to pay my premiums?
A. No, if you are in the process of claiming on your Income Protection policy, the Insurance company will not expect you to pay your premiums and they will be waived until you return to work.
Q. How much will an Income Protection policy cover me for?
A. This is another question that will vary depending on which insurer you are with. But typically the maximum you can be covered for would be £2,000 per month.
Q. What is a deferred period?
A. This is the amount of time that you need to be off work before your Income Protection policy begins paying out. It will range from 1 – 12 months and will have a big impact on your premium depending on what time frame you choose.
To give you an indication of the differences in price when changing the Deferred Period we have drawn up a table based on a 30 year old male non-smoker looking for £1,000 monthly pay-out until the age of 65.
|Deferred Period||1 Month||2 Months||3 Months||6 Months||12 Months|
It can be seen that there is a very significant reduction in premium as the deferred period increases, due to the reducing likelihood of a claim being made. If you are looking for this type of policy and would like to keep costs down, a longer deferred period may be a good way of achieving this.
Most people these days have a range of insurance policies covering different things in their life. However, only around 9.4% of UK workers have Income protection in place – research shows that over twice as many people in the UK insure their pets as insure their incomes.
Think about the potential loss in income you may incur if you were to be out of work due to an accident or illness. People pay on average £28 per month to insure their dog where on average for £7 per month you could insure your Income.
To get a better understanding of our process and to obtain an Income Protection Insurance quote simply go to Get a Quote or give us a call.
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