What is income protection?
Income protection is an insurance that pays out a percentage of your income if you are unable to work due to ill health or an injury.
Dependent on the terms of your policy, IP pays out until death, retirement or your return to work. It doesn’t however pay out if you are sacked or made redundant.
Sometimes confused with PPI, it is important to understand that this is a completely different, stand alone product in the market place. PPI pays one or more specific debts directly to the lender, Income Protection pays directly to yourself, tax free to spend in the same way that you normally would with your wages, there are no restrictions on what this can be used for.
Why should I take out income protection insurance?
If you were unable to work due to an injury or sickness and weren’t one of the very few people who receive full pay during these times, how long would you be able to mange financially without your weekly or monthly wage coming in? Two weeks? Two months?
The amount of income you are allowed to claim will not replace the exact amount of money you were earning before you had to stop work. You can expect to receive up to 70% of your earnings before tax from your normal job.
One million workers a year find themselves unable to work due to a serious illness or injury. It doesn’t matter whether or not you have children or other dependants, if you are self-employed or employed and you don’t have sick pay to fall back on, if illness would mean you couldn’t pay the bills, you should consider income protection insurance.
Not many people are able to get through their second full month without pay being affected. With the low levels of state benefits available and the length of time it takes to finally receive these benefits, everyone of working age within the UK should really consider IP.
Having Income Protection helps to make sure you don’t fall behind with your monthly bills if you are ever off work due to illness or injury, by paying a percentage of your income directly to you.
Reasons for sickness absence in the UK FROM 2019
(Source: Office for National Statistics)
Who needs Income Protection Insurance?
In the U.K, if you have a family, dependents or other regular financial commitments, you are most likely going to need an Income Protection Insurance policy. This will give you the peace of mind that goes along with knowing that if you can’t work for a variety of reasons, you will at least be safe in the knowledge that you can maintain your families’ or even your own lifestyle.
What will your policy exclude?
Income protection does not include:-
- Self inflicted injuries
- The person covered doesn’t meet the definition of incapacitated stated within the plan details
- If medical or other evidence isn’t supplied when requested
- The result of any previously stated exclusions