Income Protection Insurance

Southampton, Hampshire, National

What is Income Protection Cover?

If you were unable to work due to illness or accident/injury, what strain would this have on your finances? Could you still pay the mortgage, the council tax, the electricity, in short all the bills that just don’t stop? For much of the population it would be extremely difficult as savings do not last forever. Income protection is designed to pay you a monthly income for each month you are signed off work through sickness or injury until you are able to return to work or if you were to pass away.



How much does income protection pay out?

This depends on the amount you select at the start of the policy. The caveat is that is pays out a percentage of your earnings, this varies upon insurance but can be between 50%-70% as income protection is not designed to make you better off then working. Some people like to cover the maximum they are entitled to or set this as a amount to protect the bills which will still need paying for, the choice is yours. Which ever you decided the monthly benefit is paid as a tax free amount into your account each month.

These plans have no cash in value at any time and will cease at the end of the term. If premiums are not maintained, then cover will lapse.

The Financial Conduct Authority does not regulate trust planning.

It is not compulsory to have Income Protection insurance in place to get a mortgage, but it is highly advisable. Here is further information on the policies to consider.
 

What term should my Income Protection policy be over?

The term of the policy is specified at the outset of the policy starting. In simple terms, it means how long you are protecting yourself for example 1 – 50 years. Often the term is decided by the following points:-

Mortgage term – if your sole purpose is to protect the mortgage then usually the insurance will coincide with your mortgage term. So, however many years you decide to do the mortgage over, the critical illness cover will coincide with this.

Dependents – Taking the policy to an age whereby the children are financially independent. For example, 18 once they have finished school or 23 after university. Therefore making sure if anything happened to you, whilst they children are still relying on you, your family’s lifestyle wouldn’t need to change whilst going through this difficult time. 

Retirement age – make sure that your income is protected should the worse happen therefore by taking the policy to retirement age when your income is then your pension.


What Type of Income Protection Cover is most suited to me?


Deciding which income protection cover type is suitable for you and your family can seem challenging however we are here to help and guide you into making the right decision. 

Full Income Protection

· Pays the benefit through injury or illness – no matter the reason just if you are unable to work or suffer loss of earnings due to this. 

· No time limit on pay out – it will pay out until the policy expires, you return to work or should you pass away.

·

Low Cost Option

· Reduces the monthly premium payable

· Benefit is paid out for a maximum of 2 years (For each claim made).

· Multiple Claims can be made throughout the policy

Increasing Income Protection

·Monthly benefit increases throughout the policy term in line with inflation

· Increase happens automatically each year

·Premiums also increase in line with these changes. Should you wish to not pay the increased policy premium you can choose to not increase the cover benefit

What does deferred period mean?

The deferred period on an income protection policy is simply the period from when you are unable to work due to sickness/injury and your income benefit starting. The deferred period is selected at the start of the policy and typically is between 4 – 12 weeks, however some insurers allow for longer or shorter periods of time. The longer the deferred period tends to make the policy a little cheaper.

How to select your deferred period for your income protection . . .

The deferred depends on your personal circumstances in terms of company sick pay virus savings you may have. For example if you are employed and you receive company sick pay then it makes sense to set the deferred period once your sick pay stops. For example, if you get 4 weeks sick pay, setting the deferred period at 4 weeks could make sense. For the self-employed this can be worked out to pay straight away as you do not receive any personal sick pay or around savings. So if you have 3 months worth of savings to pay bills etc you could set the deferred period at 12 weeks. Speak to our protection specialists for more advice on this.


Are there any additional Benefits to consider when purchasing Income Protection?

Yes is the short answer to this. Income protection whilst fantastic for paying your monthly income different insurers include many other fantastic benefits, like back to work support, rehabilitation services, trauma benefits, hospital benefit etc. Speak to an advisor for the best option to suit you.


Isn’t Income protection the same as critical illness cover?

Income protection is designed to pay a percentage of your gross salary as a monthly benefit for each month you are unable to work. This can be through, illness, injury, mental health etc.

Critical illness cover provides a lump sum of cash if you are diagnosed with a critical illness that is covered on your policy with your chosen insurer.

You can have a policy to cover income protection and the income protection benefit as a cash lump sum – you are limited to one or the other.
 

Are Income Protection insurance policies paid monthly or annually & will the premiums change?

Premiums for the insurance is paid via direct debit either monthly or annual, whichever suits you best.

Guaranteed Premiums
Monthly payments remain the same through out the policy term – meaning the price you pay never increases, even if you get older or your health or circumstances change.

Reviewable Premiums
The monthly premiums can increase through out the policy term – meaning as you get older or should you develop any health conditions the prices could increase. There is no specific amount this could increase by.
Most insurers review the premiums every 5 years.
 

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