What is Income Protection Insurance?

Income Protection Insurance is designed to pay you a regular monthly income if you are incapacitated and unable to work due to illness or injury. The amount of cover is based on a percentage of your gross earnings and is suitable for both employed and self-employed people. There is no limit on the number of claims you can make and, if you are never able to work again due to illness or injury, the benefit will usually be paid until the earliest of your selected retirement age or for the term of the policy if earlier.

Who can benefit from taking out Income Protection cover?
Anyone who does not get paid by their employer indefinitely when they are off sick from work should consider an Income Protection policy. Most people would not be able to maintain their standard of living if they had to rely on benefits from Statutory Sick Pay and Employment and Support Allowance (ESA) so Income Protection could form a key part of their financial protection needs. The need for Income Protection Insurance is not merely limited to those people who are employed. Self employed people for instance if off work due to illness or injury would not receive the sick pay provision that is often provided by an employer. So in actual fact it could be argued that the need for Income Protection is greater for self-employed people.

Anyone between the ages of usually 16 and 59 can apply for Income Protection cover. As the criteria for state provision of Employment and Support Allowance (ESA) becomes more stringent, it is key that individuals consider this type of cover to maintain their standard of living should long term illness or injury occur.

What about my occupation and the premiums for an Income Protection Plan?
The likelihood of accident or illness varies depending on what occupation you do and premiums will vary to reflect this. For example, a roofer may pay a higher premium than an office clerk due to the higher risk nature of the job. However there are specialist providers who do not charge you more for having a higher risk occupation, though commonly the benefits are lower and/or would stop or be reduced when you are able to undertake any work, rather than being able to resume your original occupation. Always read the policy documents carefully to understand the terms of the policy.

What are Deferred Periods?
A deferred period could also be called a waiting period. It is the period of time that you need to be off work due to illness or accident before your Income Protection Policy begins to pay out. This time period is selected by each individual and is normally dictated by the sickness benefits that your employer provides. Thus if you are Self Employed or receive no sickness benefits from your employer, then you will usually require a very short deferment period. Deferment periods can range between 1 day and anything up to 24 months dependent on an individual’s circumstances, it is important to bear in mind that the shorter the deferment period the more effect it will have on increasing premiums.

What affects the premium I pay?
There a number of things which can affect the premium you may pay these are such things as:-
Age, health, occupation, deferment period, benefit required and indexation.