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How much income protection do I need?

How much income protection do I need?

27 Oct 2021

Taking out income protection and not sure where to start? Figuring out how much protection you need is a pretty vital first step before buying your policy, and it can be pretty daunting. After all, your income is at stake! 

The question ‘how much income protection cover do I need?’ depends on how much income you have in the first place, and how much of that income is essential rather than expendable. Figuring out how much income protection you need doesn’t have to be difficult though - let us help you out! 

Income protection explained

Income protection is there to give you a safety net if you get sick or injured and can’t work. It replaces a percentage of your income (usually 50-70%) in monthly installments. It covers you for common illnesses and injuries that will leave you unable to work - like spinal injuries, stress and mental health related conditions, some cancers, strokes, heart attacks, etc. 

Before taking out Income Protection insurance, it’s super important to review your essential monthly spend and figure out the percentage of your salary you need covered. You also need to be aware that there are variables to take into account that will affect the price of your premiums - but being too stingy and trying to get cheapy cheap premiums could leave you caught short if you need to make a claim. 

Figuring it all out can be super simple though. 

What percentage of my salary do I need to cover?

To get an idea of the level of cover you may need, it’s smart to lay out an all-expenses budget that goes into the real nitty gritty of your spending. Many people have bills and either mortgage repayments or rent to pay, plus monthly car payments like insurance, tax, finance, fuel.... Add to this paying for food, clothes, your gym membership, childcare, and your daily Starbucks, and quite a large chunk of your salary might be accounted for. You may also have repayments or interest on other loans or credit cards. 

You should work out what percentage of your salary these things take up, and give yourself a little breathing space on top. 

How long do I need cover for? 

Choosing how long to be covered for or how long you want your policy to last depends on your own circumstances. For instance, if you have a mortgage to pay off or children to support, you may want to be covered until these financial commitments have ended. 

If you have a partner or family member who could support you a little, or savings to fall back on, this may ease the strain a little. There’s also Statutory Sick Pay to take into account. You can get £96.35 per week Statutory Sick Pay (SSP) if you’re too ill to work. It’s paid by your employer for up to 28 weeks. For many people, SSP doesn’t cover all the things they need to pay for, and 28 weeks isn’t long enough to recover. However, when you buy income protection, you can set something called a deferral period. This is a time period after making a claim before your money starts being paid out. The longer this period, the cheaper your premiums. If you think you could survive on SSP and your savings for 28 weeks, you could set a nice long deferral period. 

If you’re not sure how long you want cover for, give us a call here at LifeSearch. We can give you fee-free, no-commitment advice based on your situation and help you figure it out!  We’ve got access to a wide range of the  insurance market, so we can help you find cover that, well, covers you! Contact us today.

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