If illness or sickness would mean you couldn’t pay the bills, you could consider income protection insurance. You’re most likely to need it if you’re self-employed or employed and you do not have sick pay to fall back on.
There are several different options when it comes to income protection. If you are considering an income protection policy, one of our experienced brokers at trufe will be able to source and advise you on the best policy.
According to the British Association of Insurers, 97% of all individual claims presented were paid out in 2016. This is an average of £13m a day for individual life, critical illness, and income protection insurance claims – which means it can be one of the most valuable policies that you have.
What Is an Income Protection Policy?
Income protection insurance will pay you a regular income if you can’t work due to unjust or sickness. These payments will continue to be paid until your return to work or retire, depending on the policy time that you have. Income protection insurance is sometimes referred to as permanent health insurance.
An income protection policy will not cover the exact amount of money you earned before you had to stop working, but it can be as much as two thirds.
How Much Does Income Protection Cost?
Like any insurance, how much you pay for your income protection insurance will vary. There will be several things to take into consideration, like:
- Your age
- The waiting period you choose
- Your current health
- Your job role
- If you smoke now or have previously
Your Mortgage Broker will Consider These Things to Work out How Much Cover You Will Need:
- How much your rent or mortgage is
- The number of dependants
- Your take-home pay
You may be entitled to some support from your government, but this is likely not enough to sustain your current lifestyle.
How Much Income Protection Do I Need?
Before committing to a policy, your mortgage broker will work out how much income protection you need.
How will a Broker Help with Choosing my Income Protection?
trufe brokers are experts in matching the right policy to your circumstances. Here are just a few points that you can expect with trufe on your side:
- Narrow down the income protection policies on the market to those which best suit your needs
- Identify which policy is right for you
- Help you decide how much cover you need
- Recommend how long the policy should last
First, They will Look at:
- Your debts, like your mortgage, credit cards, personal loans and other debts that need to be paid.
- Expenses that you need to cover, like childcare, holidays, celebrations, and more.
Then, They will Look at:
- If you currently have any coverage and what that package looks like. Look at the sick pay on your contract. If you cannot find it within your contract, then you can contact your HR department, and they can tell you.
If you are self-employed, your broker will make all of your provisions for sickness and accidents.
Your mortgage broker will be able to calculate the cover you will need by taking away the benefits you have from the total amount you need.
The number you are left with is the amount of income protection you are likely to need.
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What is the Difference Between Long-term and Short-term Income Protection?
Short-term income protection usually covers periods where it is expected you will recover. These are usually accidents, sickness, and some unemployment products. Short-term income protection usually only lasts up to 2 years.
Long-term income protection will provide a regular tax-free income. This is usually when you are injured or become ill and are likely going to need more than two years to recover.
What Does Long-term Income Protection Cover?
A long-term income protection policy will cover you against accident and sickness. If you were to have an accident and become injured or fall ill, your long-term income protection would cover a percentage of your income.
If you are likely to fall ill again, then having a policy that allows multiple claims is a good idea.
Long-term income protection is ideal for serious diseases, cancer, and disabilities. The policy could pay out until you retire or you die. Or, you may become well enough to work again.
How Long will long-term Income Protection Cover Last?
There is typically a minimum term of five years for long-term income protection. And the cover can go until you reach 67 or your chosen retirement age. In most cases, you should choose a policy that will last until you wish to retire. So you will have earnings to cover the entirety of your working life.
Should I Get an Inflation-Linked Income Protection Cover?
If you just wish to cover your mortgage, then you won’t need the policy to be linked to inflation. However, if you wish to continue having the same lifestyle, then it is best to get a policy linked to inflation.
This makes sure that if you were to fall in or have an accident, you would be able to live in the same comfortable style that you do now.
What Happens to My Income Protection if I Die?
Income protection will not pay out if you die. If you have dependents, it is sensible to have a life insurance policy too.
What Is A Deferred Period?
When you take out your income protection policy, there is likely a time that you will need to wait before the policy pays out. Most people will arrange an income protection policy to line up with the date that their employee sick pay stops.
You’ll need to check all of the contracts to ensure that the dates will line up to enable this switch between employer sick pay and income protection pay smoothly.
The longer the deferred period is, the lower your premium is likely to be.
Thinking of Getting Income Protecion?
If you are ready to protect your income in the face of illness or accidents, start your protection journey today
or give us a call on 0113 3205 151 to discuss your income protection cover options.
To find out more about the income protection services we offer, visit our income protection page.