Income Protection

Anyone who has an income can benefit from income protection insurance, but not everyone needs cover. To figure out whether taking out a policy is right for you, consider whether the following apply to your financial situation:

·        Your savings would not be enough to cover your living costs if you were too ill to work

·        You are only entitled to statutory sick pay (SSP), which is not enough to cover your expenses

·        The sick pay your employer offers would not be enough to cover your outgoings, or only covers short-term absences

·        You’re self-employed and therefore do not receive sick pay

·        You don’t already have sickness or injury cover as part of a different insurance package

If you identify with any of the above, income protection insurance could provide you with financial security should the unexpected come to pass. Regardless of whether you have dependants, a loss of income could put you in a difficult financial situation, especially if you’re unable to work for many months.

You can expect income protection policies to cover most instances where you are unable to work due to either an illness or a physical injury. Some types of insurance may also cover you if you’re made redundant, though this type of cover usually costs extra and typically won’t provide you with indefinite payments. Accident, sickness and unemployment insurance will cover both scenarios, giving you a more complete level of protection.

Most income protection policies come with fixed monthly premiums, but the cost of these will depend on a wide range of factors, such as:

·  Income: The higher your income, the higher your premiums are likely to be. This is because your insurance provider will have to pay out more money if you make a successful claim.

·  Current Job: If your job poses a high risk to your health and wellbeing, you may be seen as more likely to become injured or unwell, which will be reflected in higher premiums.

·  Waiting Period: Having a waiting period of a few months will usually lower premiums, so if you don’t need your money right away, this can be a good way to lower your costs.

·  Health Conditions: Having pre-existing health conditions or certain illnesses in your family medical history could increase your policy costs. However, these costs can sometimes be mitigated by making positive lifestyle changes.

·  Policy Term: Short-term cover is usually cheaper than long-term, but some long-term policies can be customised so that your cover reduces over time, which may lower your premiums.

Will income protection insurance cover losing my job?

Depending on the policy you have, income protection insurance might pay out if you lose your job. Accident and sickness cover will only pay out if you can no longer work due to a health-related reason, so you need to make sure you have unemployment or redundancy cover added on or as a separate policy.

Keep in mind that unemployment cover typically doesn’t pay out if you accept voluntary redundancy or lose your job due to misconduct or performance issues. You also won’t be able to take out a policy once you’ve already been informed that you’re being made redundant.

My salary increased, can I update my income protection cover?

Most of the time, you should be able to update your income protection cover when your salary increases. However, keep in mind that your premiums may also increase if you’re taking out more cover. Simply inform your policy provider of your new circumstances and they can help you to calculate everything you need to know.

Can I claim on my insurance while receiving sick pay?

Income protection insurance is usually designed to pay out when you no longer receive sick pay. Some policies may allow you to claim both your sick pay and your insurance payouts, but they may also adjust the amount you receive. If you know your employer will pay you for a number of weeks or months while you’re off sick, it can be worth adding this as a waiting period for your income protection insurance policy instead of claiming both at once.

Does income protection insurance cover mortgage payments?

Your income protection insurance payouts can be used on any expenses you have. If you have a mortgage, make sure you factor this into your calculations before deciding on how much cover you need.

However, you could also take out mortgage protection insurance if you’re particularly concerned about keeping on top of payments. This type of cover only pays your monthly mortgage payments and wouldn’t help you pay your bills or general expenses.

Will income protection insurance pay out to my family if I die?

No, income protection insurance is designed to replace your income while you’re still alive so that you can continue to support yourself and your family. To make sure your family is financially stable after you die, you may want to consider taking out life insurance, which can pay out a lump sum to your dependants after your death.

Can I get income protection insurance if I’m self-employed?

Yes, income protection insurance is available for the self-employed. To get the right amount of cover, you will need to provide your insurer with evidence of how much you earn on a monthly basis.

It’s worth noting that if you’re self-employed, you will be exempt from unemployment and redundancy cover, as you are working for yourself. However, you will be eligible for illness and injury cover.