What does income protection not cover?
5 Oct 2020
Now more than ever, income protection has been highlighted as a pretty important insurance product for many. As we have come to realise in 2020, nothing is guaranteed and anything can happen, and being without your usual income for whatever reason can trigger a domino effect of issues in your life. So why not protect that income? If you are employed, income protection insurance should be on your radar.
But before you go ahead and take out a policy, you should be very clear about what this insurance does and does not cover so that you don’t try to claim on an exclusion and end up disappointed…
What is income protection?
Let’s start with a brief rundown on what this insurance product is designed to do. Should you become seriously ill or injured and can no longer go to work, income protection supports you financially by replacing your income during this time period. The money is paid out regularly to keep your life ticking over as normally as possible. It typically covers between 50-70% of your regular salary, depending on what you decide when you take out your policy.
Once up and running, your income protection policy will continue to support you until you either go back to work, reach retirement or pass away during the claim period - whichever comes first.
What isn’t covered by income protection?
When you take out income protection, you’ll be asked to decide on something called a ‘deferral’ period. The deferral period is the period of time between you claiming on your policy, and your payments kicking in. This can be as little as four weeks, or up to a year - you decide. The longer your deferral period, the cheaper your monthly premiums. During this time, you will not receive payments so it’s important to be aware of this. You might be eligible for Statutory Sick Pay (SSP) from your employer, or you may have savings to tide you over in the meantime, so factor this in when deciding on your deferral period.
There are also a few illnesses and injuries that you may not be covered for under your policy. You’ll need to consult the specific terms and conditions of a policy to know what these are, as it may differ from provider to provider. It’s important to remember however that you’re only covered if it prevents you from going to work. You may want to consider critical illness cover if you want a payout for the illness or injury itself.
You also are unlikely to be covered for any pre-existing conditions that you knew about before taking out the policy. You may also not be covered for back pain or illness or injury that could have been avoided should you have followed medical advice, or anything self-inflicted such as alcohol and drugs misuse, or a criminal act. Pregnancy is not included, although some insurers may cover you for pregnancy-related complications. War and cosmetic surgery related illnesses and taking part in dangerous activities without the right equipment or training may also be excluded. Basically, if it’s not a completely unforeseen accident, you’ll struggle to claim on it.
If you get made redundant, get fired or are partly responsible for losing your job, your income protection policy also won’t pay out. Injury and illness is key here - that has to be the reason that you are out of work. The only instance where you might receive a payout is if you’re made redundant whilst you’re out of work with sickness or injury and receiving income protection benefits from an ongoing claim. Again, this differs between policies.
Ok, so what is covered by income protection?
Income protection covers you for most illnesses that leave you unable to work for a period of time - or ever. This could be stress-related illnesses, back conditions (that couldn’t have been avoided by following medical advice), cancer or a serious heart condition. It also covers you for mental health disabilities. In fact, back in 2017 mental health was the most common cause of claim on income protection policies.
And although income protection will cover you for most illnesses and injuries, it won’t cover you for every single eventuality under the sun. Every policy is slightly different, so make sure you’re familiar with your policy’s T&Cs or speak to your insurance company to be totally clear about what’s covered - or not covered.
With many people, during the COVID-19 pandemic, experiencing for perhaps the first time what it’s like to be out of work due to illness, income protection has never been more important. If you’ve got an income, protect it. You’ll never regret investing in your financial safety, right?
If there’s anything else that you’re not sure about when it comes to what your income protection policy does and does not cover, LifeSearch are more than happy to lend a helping hand. Pick up the phone today and call 0800 316 7253 or request a callback.
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