If you were unable to work due to illness or accident, what strain would this have on your finances? Could you still pay the mortgage, the council tax, the electricity? For much of the population it would be extremely difficult, as savings do not last forever.
Income protection insurance 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.
Income protection insurance (sometimes known as permanent health insurance) is a long-term insurance policy designed to help you if you cannot work because you are ill or injured. It ensures you continue to receive a regular income until you retire or are able to return to work. This type of insurance is particularly popular with self-employed clients who do not receive sick pay.
Income protection insurance pays out a regular tax-free income if you are unable to work due to illness or injury. Unlike statutory sick pay, which is limited and time-restricted, income protection can replace a significant portion of your monthly salary, helping you keep up with your mortgage, bills and everyday outgoings while you recover.
Self-employed workers, those without a generous employer sick pay scheme and anyone with significant financial commitments should consider income protection as a priority. Statistics show that the average long-term absence from work lasts well over a year, meaning the financial impact of being unable to work can quickly become serious without the right cover in place.
Alexander Southwell Mortgage Services compares income protection insurance from leading providers across the whole of the market. We can advise on the right deferral period, benefit level and policy term to suit your circumstances. Our service is completely fee-free, and we advise clients throughout Southampton, Hampshire and the rest of the UK.
Related protection advice:
Income protection works well alongside other forms of cover. Find out more about life insurance, critical illness cover insurance and buildings and contents insurance, or visit our main mortgage protection insurance page.
This depends on the amount you select at the start of the policy. The benefit pays out a percentage of your earnings, typically between 50% and 70%, as income protection is not designed to make you better off than if you were working. The monthly benefit is paid as a tax-free amount into your account each month. As with all insurance policies, conditions and exclusions will apply.
Policy Term
The term of the policy is specified at the outset. In simple terms, it means how long you are protecting yourself, for example 1 to 50 years. The term is often decided by the following:
Mortgage term: If your main purpose is to protect your mortgage repayments then the income protection policy usually coincides with your mortgage term. So however many years your mortgage runs, the income protection covers the same period.
Dependents: Taking the policy to an age where your children are financially independent, for example 18 after school or 23 after university, ensures your family's lifestyle would not be impacted if you were unable to work during those years.
Retirement age: Make sure your income is protected should the worst happen, by taking the policy to retirement age, at which point your pension takes over as your main income source.
Self-employed: For self-employed individuals, income protection is especially important as there is no company sick pay. Our advisers can help you set the right deferred period and benefit level to match your personal financial position.
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. Whether you want full comprehensive cover, a lower-cost option, or inflation-linked protection, there are three types to choose from:
Good to know: The deferred period is the gap between when you stop being able to work and when your income benefit begins. It is typically 4 to 12 weeks. A longer deferred period usually reduces the monthly premium, so it is worth considering how long your savings or employer sick pay would last before the policy needs to pay out.
Back to work support: Many income protection policies include back-to-work support services to help you return to work as soon as you are ready. This can include access to physiotherapy, counselling, and occupational health advice, helping you to recover and get back on your feet more quickly.
Rehabilitation services: Some policies include access to specialist rehabilitation services such as physiotherapy, occupational therapy and expert medical second opinions to support your recovery.
Hospital benefit: Some income protection policies include a hospital benefit that pays a daily or weekly amount for each night spent in hospital, in addition to the standard income replacement benefit.
Fracture cover: Fracture cover pays you a lump sum if you suffer one of the specified fractures during any 12-month period. Most insurance companies will pay one successful claim each policy year.
