Income protection insurance designed to provide you an income if you’re unable to work due to injury or illness. This can help alleviate the financial blow that a loss of income would have, keeping your personal finances on track whilst you’re out of work. Paid directly to you, the instalments usually equate to between 50 and 70% of your typical gross monthly income and are tax-exempt.
It’s not critical illness insurance
So how does this type of insurance differ to other types of financial protection? When compared to critical illness cover, income protection insurance is far more comprehensive. Rather than exclusively covering you for a critical illness, income protection will give you regular payouts for a wide range of illnesses and injury which prevent you from carrying out your job.
It’s not life insurance
In comparison to life insurance, a very obvious difference is, crucially, you’ll be able to experience the benefits of your policy yourself. Payouts are intended to help you along the road to recovery, a damn sight more cheerful than the circumstances of a life insurance payout!
No claim caps
A further marked difference it poses is the amount of claims you’re able to make – for all typical long-term income protection insurance policies, you’ll be able to claim on your policy as many times as necessary. So unlike many policies which expire after one claim, provided that you continue to pay your premium, you’ll be covered until the end of your term.
The statistics: Is it worth getting?
It’s estimated that every year, 300,000 people leave employment due to illness or injury, emphasising that incapacitating illnesses and injuries are very much a reality. What’s more, the average duration of long-term sick leave is 7 years, a statistic made even more worrying by the findings that over three quarters of UK employers fail to provide any form of life, income protection or critical illness cover to their employees. The sick-benefits you’ll receive from the government in terms of Statutory Sick Pay will unlikely be much of a substitute, so income protection should be considered by everyone with an income to protect.
Purchasing your policy
As previously mentioned, income protection insurance is designed to provide from 50 to 70% of your typical income, so if your annual salary is £20,000 then it’s unlikely you’ll manage to bag a 5 grand benefit. In this sense, it’s important to set your monthly benefit at a realistic amount when gathering income protection quotes, and similar care should be taken when setting your cover duration; placing a sensible cap on both will result in more affordable premiums. A simple way to secure lower premiums is to consider buying income protection through a discount broker.
To find out more about income protection and how it can benefit you, visit here.