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What is income protection?
Income protection insurance replaces some of your monthly income if you are unable to work due to illness or injury. It pays you a tax-free monthly income until you return to work, you retire, or your policy expires.
Whether you're employed, or self-employed, this type of cover is designed to support you and your family by covering your regular outgoings, to help maintain your lifestyle, should something unexpected happen.
Do I need income protection?
It's a pretty good idea! Unlike other protection products like life insurance and critical illness insurance, which are traditionally most suited to people with debts (usually a mortgage) - income protection is a useful solution for nearly everyone.
That’s because most of us earn a regular income, and would struggle financially to cover our outgoings if we were unable to work.
- Could you or your family cover mortgage payments, or regular outgoings if you couldn’t work?
- Would you get any financial support from your employer if you went off work sick?
- Are you entitled to any state support if you couldn’t work due to ill-health?
- Do you have any savings that you’d be able to use if you couldn’t work?
- If you lost your income, could you change your lifestyle to reduce your regular outgoings, and would you be happy to do that?
- If your answer to any of these is no, then income protection is a pretty sensible idea.
We believe everyone should at least consider income protection. Whether you’re young and renting, or have a mortgage and a family, your income is probably the foundation on which life happens and life grows.
- Your salary
- Your occupation
- Pre-existing conditions
- Level of cover
- Deferment period
- Pay out term
Income protection cost and cover calculator
Our simple calculator can help you to work out what insurance you need and give you estimated costs for different types of life cover. You can then speak to an adviser or buy online.
How does income protection insurance work?
There are five main choices that you’ll need to make:
- Cover level: The amount of benefit you’ll receive each month. You can choose the right level for you, but typically it’s up to 60% of your gross monthly income.
- Cover term: How long you’d like to be protected for. This is usually a fixed number of years, say 25, or however many years you think you’ll be in full-time employment.
- Benefit term: How long the insurance benefit will be paid if you’re ill and unable to work. Many people want the money to continue until retirement, but you can pick say two or five years if that’s all you need.
- Deferred period: How long after you’ve stopped working that you’d like the income protection benefit to start. This product feature can sometimes be a bit confusing, but often people don’t need their insurance to start paying straight away, particularly if they’re employed and they receive sick-pay for a period of time. If you're self-employed however, you might need a short deferred periods as you won’t have financial support from an employer.
- Definition of incapacity: This is what qualifies you to start receiving your insurance benefit. The definition that most insurers offer, and probably the simplest, is called ‘own occupation’, which means that if you are ill and can’t do your current job you qualify to start receiving the benefit. Some insurers also offer slightly stricter definitions, like ‘any occupation’, which means that to qualify for your insurance benefit you must not be able to do your current job, or any job at all, if you fall ill.
Income protection is an extremely useful product for many people, but it can be a little confusing. Speak to one of our friendly advisers, who will happily take you through the five steps above to work out what cover you need.
What does my policy cover?
Illness - If you are signed off work by your GP for any illness, your policy is there for you and will start paying out once your deferment period has ended - it could be anything from anxiety or depression, to a stroke or heart attack. Income protection extends to any reason you're forced off work sick.
Accident / injury - From car accidents and broken bones, to putting your back out in the gym. Your policy will start protecting you once your deferment period has ended and if your GP believes you are unable to work.
What isn't covered?
Death - Income protection doesn't cover you upon death. Instead, you would need a life insurance policy.
Redundancy - It doesn’t cover redundancy, only health-based absence from work while you’re still employed. Redundancy cover can be bought as part of mortgage protection insurance so if in doubt speak with an expert adviser.
Dismissal - It falls into the same category as redundancy, and isn't covered under income protection.
Can I get income protection if I'm self-employed?
Absolutely! Income protection is important for everyone, especially those who are contractors, freelancers, self-employed, business owners, or even on a zero-hours contract.
A career under your own steam is a great thing, but it carries risk. What’d happen if you broke a limb, got sick, or your mental health took a turn (dependent on condition)? What if a poor health situation lasted for weeks, or months, or longer?
In many cases, being self-employed means you rely, mostly or entirely, on yourself, your skills, your mind and your body. If that’s your situation, you need to think seriously about covering any scenarios where you’re unable to show up.
How LifeSearch can support you
LifeSearch are an independent intermediary provide you with top customer service and ongoing support should you ever need it.
We're independent
We offer expert, fee-free advice with no obligation. We do all the leg work for you, but will always keep you in the loop.
Here for you
We work for you and not the insurer - which means it's our job to listen to your needs and search the market for the policies and providers, best suited to you.
Claims
If you need to claim, we'll do it for you. We have a dedicated claims desk to support you and your family during life's darkest times - so you can get back to what matters.
A Little more about LifeSearch
Life insurance isn’t fun. There are several kinds of life insurance policies to choose from, and dozens of providers with their own versions of those products.
Without LifeSearch in your corner that’s a lot of reading … reading you don’t have to do.
Frequently asked questions about income protection
Income protection is not the same as PPI. PPI covers debts and pay-outs go to the lender. It provides a percentage of your income if you can’t work due to illness or injury.
Your income protection policy assumes you’ll recover, partially or fully, and get back to work sooner or later. There’s no lump sum payout … it steadily keeps the cashflow coming.
Income protection and critical illness do different things but they work well together, hand-in-hand, as two policies covering all outcomes.
No, as it is a personal insurance policy.
If you have income protection as a benefit in your employment package, it’s often your employer that’ll be paying the premiums - that’s the idea of it being a benefit! They’re usually a tax deductible business expense, which means that they are a cost that can be subtracted from a company’s income before it’s subject to taxation.
This means that the policy hasn’t been taxed at the payment stage, so is generally taxable as income on a claim.
Assuming you’ve kept up your monthly policy payments, you can activate your policy if ever you’re signed off work sick, you simply make a claim.
Once your deferment or grace period – which you selected at application – is over, medical and employer checks may be made and, once everything’s confirmed, your claims payments will start.
They’ll last as long as you need them to until one of the following things happen:
- you return to work
- your policy term expires
- your payment/ claim term expires
- you leave your job
- you retire
- you die
- if you’re off sick long-term, your insurer may regularly check in with your doctor and/ or employer to stay current with your situation.
The short version is that as long as you’re off sick and all parties agree, your income protection payments keep coming until the situation changes.
Certainly, in most cases. Depending on the severity of your condition, your insurer may increase your premium or exclude that specific condition from your policy, so that it can't be claimed against in the future.
Either way, this doesn't mean that you can't get cover just because of a pre-existing condition, but every insurer is different, so it's worth speaking to one of our advisers to find out which one is best suited to you.
Firstly, you can choose if the policy ends at retirement, or at a certain age. Retirement is a common option, as because you’re no longer working, you obviously no longer have an income to protect. Your policy will also end if you pass away.
It’s just as important - if not more important - to ensure that your family will be looked after financially when you’re no longer around. Income protection won’t pay out when you pass away, but that’s what life insurance is for.
A more cost-effective alternative to full term income protection, is a short-term policy.
Rather than the policy paying out until you return to work or retire, there will be a fixed claim period - usually 12 or 24 months.
Some providers will offer a flexible option of a 5-year claim period too.
Easy guides to help you get started
Income protection & your mental health
Nothing is worth risking your mental health for. Find out how income protection can give you a helping hand.
By Sophie Cussons, Marketing Executive
11 min read
Can you claim two income protection policies?
You can, but you're limited to how much cover you can have - so it may be pointless
By John Rogers, Marketing Executive
2 min read
What sickness benefits can I get if can't work?
Wondering what support you’d receive if you fell ill and couldn’t work? This guide has the answers.
By Katie Crook-Davies, Protection Writer
5 min readReady to take the first steps to get protected?
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