Income Protection

Craig takes a look at income protection and why it can be a gamechanger if you are unable to work.

What is income protection?

Income protection is a type of insurance. It  pays out a percentage of your monthly income if you are unable to work due to illness or injury.

Your income is important and keeps your family secure. So, if you’d like to make sure you still have regular money coming in if anything happens, you might want some income protection. 

How does income protection work? 

It’s an insurance policy, so you pay a monthly or annual premium for it, just like any other type of insurance. 

Then, if you can’t work because of sickness, disability, or other reasons (depending on your policy criteria), you will receive a regular income until you either return to paid work, retire, pass away or the policy term comes to an end. 

The amount that you receive could be anything from 60% to 65% of your pre-tax income. Payments (which are tax free) will start after a pre-agreed waiting period, which could be a certain number of weeks or months. You’ll pay more in premiums if the waiting period is shorter, or your income is relatively large.

Income protection is different to life insurance or critical illness cover. Both of these give you one-off lump sums in the event of your death or the diagnosis of a critical illness. They don’t pay a monthly income. That’s why it’s important to seek financial advice – to get the right protection in place for your lifestyle and commitments. 

Who could benefit from income protection? 

If you work in a high-risk profession or have high-risk hobbies, income protection would protect you if you’re unable to work because of an accident. 

If you’ve suffered an illness in the past and feel you’re at risk of being unable to work because of it, income protection could provide peace of mind, too. 

Many self-employed people take out income protection, as they don’t receive sick pay if they are unable to work. 

What should I consider for an income protection policy?

Some things to consider if you are thinking about getting income protection include: 

  • Do you receive sick pay from your employer? How long does this pay last?
  • Do you already have a good level of savings that you could rely on if you were unable to work?
  • Do you know how much Statutory Sick Pay is? Could you live on this amount?
  • Can you keep up with the premiums? 
  • What are the exclusions to the policy? Would you find these difficult to manage? 
  • Are you close enough to retirement to not need income protection? 

How are premiums calculated? 

As with any insurance policy that’s linked to your life and health, your premium will be influenced by factors like your age, health, smoking and your occupation. 

The monthly premium will also be affected by the amount of income you need and how soon you would like payments to start.

Our Protection Advisers will advise and guide you through the most appropriate type of policy, helping you find value for money as well as the peace of mind of knowing your income is protected. 

Get in touch and we’ll find you an income protection policy to suit your needs and keep your family secure.