Income Protection insurance provides an income if you can’t work because of a long-term illness or an accident. It is often a high priority for those with a mortgage and is also popular with people who would not be able to meet their financial commitments on state benefits.
- Cover is based on a % of your earnings, usually 60% maximum
- Benefits are paid tax free
- The policy pays out from the date you claim until you return to work or retire
- Cover can start on day one or you can defer it for 1-12 months
- Your income is assessed at the time you claim, not when you buy the policy
- Your premiums stay the same for the entire policy
- You can choose to increase your protection to cover inflation
What is an own occupation policy?
We would normally recommend you buy an “own occupation” policy, which pays out if you can’t do your job, not just any relevant job. These policies are perceived as better because they don’t involve arbitrary tests like whether or not you can walk or hold a pen for more than five minutes.
What is a deferred period?
A deferred policy pays out after the first 3 or 6 months instead of straight away, leaving you responsible for your own finances for the first few months you’re out of work. It makes it a lot cheaper than buying cover from day one, which is rarely necessary.
Deferring means your premiums are more affordable. How long do you need to defer your policy? Ideally you’ll have 3 to 6 months’ worth of living expenses saved to cover the deferred period.
We recommend guaranteed cover with guaranteed premiums
We normally recommend guaranteed policies over reviewable cover because it’s easier to budget for, since the premiums stay the same even if you claim.
Is it suitable for the self-employed or business owners?
IP isn’t just for salaried employees. It’s also vital for the self-employed and small business owners, where being unable to work has a financial effect from day one. These days insurers are tailoring income protection insurance to small business owners and making their products more flexible. We know which insurers to use looking for those who assess income at the point of claim stage rather than at the beginning and based on a 12 month average, rather than three years. Some insurance companies even take earnings from previous employment into account.
There are many options, and we’ll be delighted to guide you through them to find the perfect products for your needs, shopping around the entire market to find you the best deal.