Can you claim income protection if you lose your job?

If you have an income protection insurance policy, it won’t cover you if you quit your job, or get fired. Sure, there are other types of insurance out there designed to protect you from different eventualities, but income protection will only pay out if you can’t work specifically due to illness or injury.

Losing your job or being unable to work and cover your mortgage or credit card repayments and provide for your family is a scary prospect, so it’s understandable that you may want to be covered against this. So, is income protection the best product and what are the alternatives?

Is income protection the right product for me?

Income protection will protect you if you can’t work, but only due to injury or illness. It pays out a monthly sum to live on, usually between 50-70% of your income - you decide this when you take out your policy. 

Perhaps you are young and active and thinking there’s no point paying monthly for a policy that protects against serious illness or injury. What are the chances, hey? Well, they are pretty substantial actually. 

2.6 million people [1] now find themselves unable to work due to long term sickness. Plus, only a minority of employers [2] support their staff for more than a year if they are off sick. The fact is that we are not invincible and we don’t know what is around the corner. That’s why income protection insurance is such an important insurance product.

However, if you become unemployed for whatever reason, then your income protection policy won’t pay out. The only loophole is that it may continue to pay out if you are made redundant during the time that you are out of work with sickness or injury and receiving benefits from an ongoing claim, but you must have been employed when you initially made your claim. This does differ between policies and providers though, so check your small print!

Income protection also won’t pay out for pre-existing medical conditions or any injury or illness that is self-inflicted, such as alcohol or drug misuse, criminal acts, cosmetic surgery or war-related issues.

Short term income protection

You could look into short term income protection. Some short term income protection policies may offer cover for unemployment, however these particular policies are quite hard to come by since the COVID-19 pandemic. Plus, there are many restrictive caveats on unemployment that could leave you paying into a plan that you may struggle to claim on.

There are many other benefits to this product though - namely, its affordability. It’s a more budget-friendly version of standard income protection, paying out an agreed monthly amount during a short term period of usually 1-2 years if you are out of work due to illness or injury.

Ultimately, income protection is the best insurance product out there to cover you if you are out of work. Yes, it won’t cover you if you lose your job, but at least in that eventuality, you have the option of finding something else. If you physically cannot work due to illness or injury, how are those bills going to get paid? 

In times of such uncertainty, income protection and unemployment is a hot topic. We would always recommend speaking to an expert before taking out any cover.

References

[1] https://news.sky.com/story/number-of-long-term-sick-hits-record-high-of-2-6-million-12959783#:~:text=The%20level%20of%20illness%20among,July%2C%20according%20to%20official%20figures.

[2] https://www.which.co.uk/money/insurance/life-insurance/income-protection-explained-aum068h7cqr3