How long does income protection pay for?

How long does income protection pay for?

16 Feb 2022

In a perfect world, we would all be happy, healthy and fit to work. But the reality is that becoming seriously ill or injured is probably more likely than many of us would like to admit. If the main breadwinner is unable to go to work and bring home the bacon, how would your family maintain their standard of living? How would you pay the mortgage or rent? Income protection insurance just may be the answer!

While many of us would prefer not to think about the worst-case scenario, getting income protection is simply about considering every eventuality and making sure your family’s financial future is secure. That’s got to be worth a second thought, right? Of course, you may have a few questions about income protection. Chief among these is probably how long does income protection pay for. We hope to offer some clarity.

How does income protection work?

Let’s not get ahead of ourselves. Before we dive into how long income protection lasts, it’s important to know what income protection is and how income protection works. Put simply, should you become too ill or injured to work, income protection is designed to offer you a replacement income. Sounds like the perfect protection product, doesn’t it? Less than a decade ago, only 1 in 10 working-age families had income protection. Today, nearly half of people aged between 25 and 44 are thinking about purchasing income protection insurance to safeguard their income. 

Income protection will generally cover between 50% and 70% of your normal salary. The cost of your monthly premium will boil down to your age, occupation, smoker status, health and lifestyle and, most importantly, the percentage of income you wish to cover.

You also need to think about the range of illnesses and injuries you would like your policy to cover as well as the ‘deferral’ period. The deferral period refers to the time between you making a claim and when you start to receive benefits. If you’re entitled to sick pay from your employer, it may be worth looking into how long this could sustain your family and cover expenses. After all, the longer your deferral period is, the cheaper your premiums will be.

How long does income protection pay for?

Income protection will generally pay out until you either retire, pass away or return to work.

Most people tend to opt for policies that last until they’re well enough to go back to work and can start bringing home the bacon again. Some policies may be short-term or have fixed payout periods, lasting for one or two years, but can also last for longer. Again, how much protection you need will depend on how long your sick pay, savings and any other benefits you may receive will potentially last. Remember, the longer your policy lasts, the more expensive it will be.  

For obvious reasons, retirement is quite a common end date for income protection policies. Just think about it, the need to protect your income and many other financial worries tend to disappear once we retire. 

It’s worth noting that insurers also have an age limit, after which income protection will stop paying. For many insurers this age is 70, but for some it’s lower. However, it’s likely you will have retired by this age. Make sure you read the fine print and understand when this age limit is when buying your policy. 

But remember, income protection will not pay out when you pass away. So, it’s also worthwhile for many to take out life insurance too, so that’s something just as important to consider to make sure your family is protected when you’re no longer around.

What happens when income protection runs out?

The great thing about income protection is that you can agree on a benefit period that suits your family’s needs. That said, it’s nearly impossible to plan for every eventuality. What happens if your benefit period ends and you’re unable to return to work? Will your income protection payments stop? What if you want to make a claim after your policy has ended?

Unfortunately, if you reach the end of your policy’s benefit period, you will no longer receive payments. Likewise, if your policy ends before you become seriously ill or injured, you will not be able to later make a claim. That’s why it’s important to think carefully about the term of your policy,  your benefit period and deferral period. 

Speaking with a trustworthy protection adviser can be extremely helpful. They will offer expert advice and help you make sense of what it is that you need from income protection insurance.  With LifeSearch Care, you can also gain access to exclusive counselling and support that will help you on the road to recovery.

Does income protection cover redundancy?

If you are worried about being left without money in your pockets if you’re made redundant, then income protection may not be the right option for you. 

Income protection only pays out in the event of illness or injury. So - unless you are already claiming income protection and are then made redundant - it’s unlikely that income protection will pay out. The same is typically true for short-term policies, but it’s always best to check your policy details.

Want to know more? Just pick up the phone and give us a call on 0800 316 7253 or request a callback to speak with one of our friendly experts. We’d be happy to answer any questions you may have. Let us help you protect the life you love today.


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