Joint Income Protection Insurance

Joint Income Protection Insurance

22 Jul 2020

LifeSearch’s Health, Wealth and Happiness report from 2019 found that around 1 in 20 women and 1 in 10 men in the U.K had income protection in place,  which means that income protection is a seriously under-used protection product. It does what it says on the tin - protects your income by replacing around 50-70% of it if an injury or serious illness means you’re unable to work - which makes it a must if you’ve got big financial commitments or a family to support. 

If you’ve got a partner who’s salary you can rely on to take care of the cash whilst you can’t work, it’s true that income protection might not seem vital, but what if you’re off sick for a long time? The longest income protection claim has been paying out for more than 30 years! It’s also important to remember that your partner isn’t invincible, and could well fall sick too. Unless you think you’d be able to survive on Statutory Sick Pay (currently, £95.85 a week, paid for up to 28 weeks.) or on savings, it’s wise to consider income protection for both you and your partner. 

How does income protection insurance work? 

Income protection insurance is pretty simple. If you find yourself too ill or physically injured to work, you’ll be paid a percentage of your wage (typically between 50 and 70%, but some policies will cover you for more) which is usually tax free. Payments are made monthly, like your wage would be, which for many is preferable to the lump sum pay out (like the pay out from a critical illness policy, for instance) as it’s easier to budget. 

These monthly payments will continue until one of four things happens:

  1. You recover and can return to work, good as new.
  2. You retire.
  3. You pass away during the claim period.
  4. Your set claim period ends.
If you return to work and then later fall ill or get injured, you can claim again and again in line with the terms of the policy for as long as your coverage lasts. You decide how long your cover lasts when you take out your policy. 

Can we get joint income protection insurance? 

If both you and your partner want to buy joint life protection products, there are plenty of options for you. You can buy a joint life insurance policy, and many insurers allow joint mortgage protection policies, but at the moment it isn’t possible to buy joint income protection policies. This is because each policy is underwritten on an individual basis that takes into account individual circumstances when calculating your premiums. Each person’s premiums may be different depending on job, lifestyle, age, medical history, level of cover, etcetera. 

Whilst joint life insurance policies may be the right choice for many people, there are benefits to having separate income protection policies, like being able to alter individual policies if circumstances change without affecting the other partner’s cover. On top of this, joint life insurance policies mostly only pay out once, but having separate income protection policies means you’ll both be able to receive payouts when you need them. 

How much does an income protection policy cost? 

When it comes to the cost of your premiums, these can vary a lot from person to person. It’s not just the amount of time you want to be covered for (many choose until their mortgage is paid/children have left home, but some people want to be covered until retirement) but a range of other variables, including what level of coverage you’d like. Your lifestyle, hobbies, job, current health and medical history, and age will also play a part in how much your premiums cost. 

You can also set what’s called a deferral period for your income protection, which is the period of time between you claiming your pay out and starting to receive the money.  If you’ve got a substantial amount in savings, or you’re eligible for Statutory Sick Pay (SSP)/a good amount of employer sick pay, you might be okay for a longer period of time which means you could set a longer deferral period.  A longer deferral period results in cheaper premiums, so it’s worth figuring out how long you can go without a paycheque.

If you’re worried about budgeting for two separate policies rather than one, arrange the percentage of the wage each partner will need cover for on the basis of how much they contribute to the household budget. If one of your incomes’ makes up 80% of your budget, it would be wise for that partner to get a larger percentage of their income protected. 

With a few different possibilities to consider when choosing the income protection policies to cover you and your partner, picking out a policy shouldn’t be a challenge. Give the LifeSearch team a call on 0800 316 7253 and we’ll work with you to find the right solution. 

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