Income Protection Insurance
Something you might want to consider when shopping around for private medical insurance policies is income protection insurance.
The two serve different purposes, and so working out exactly what you need your insurance policy for is important as you may find, on careful analysis, that what you thought you wanted isn’t actually what you need.
We’ll explain exactly what income protection insurance is and help you decide if it’s right for you over the course of this guide.
What is income protection insurance?
Income protection policies are closer to critical illness cover than to conventional private medical insurance. The idea is that if you become ill or injured and as a result are no longer able to work, then your income protection policy will pay out in the form of a regular replacement income, typically around 80% of your standard salary.
This will allow you to stay at home and recover, without worrying about your ability to keep up with day to day payments, whether it’s food shopping or mortgage repayments.
The pay-out will generally continue until either:
- You return to work, or
- You reach retirement age.
Short Term vs. Long Term
Income protection plans come in both short term and long term forms.
Short term income protection insurance policies will pay out following an absence as short as a week and work in much the same way as conventional statutory sick pay.
Longer term income protection policies tend not to start paying out until an absence of up to around 6 months or sometimes even longer.
The exact length of the absence required, as well as the term of the pay-out, will depend on the insurance provider’s policy and so you should also make absolutely certain that you read all of the small print associated with each individual policy before you actually sign on the dotted line.
Do I need income protection?
You may find that you already have an income protection plan as part of your employee benefits package, often tied in with a company life insurance plan.
Of course, if this is the case, then you won’t need to open up a policy yourself.
You should also consider critical illness cover as a viable alternative to income protection insurance. Critical illness cover serves a more specific purpose, paying out only in the event that you develop on of a specific list of illnesses or conditions, but it is also (generally speaking) somewhat cheaper, though this will depend of course on the extent of cover you require from either.
Income Protection vs. Private Medical Insurance
If you take out an income protection insurance policy, or indeed a critical illness plan, with the intention of using the money paid out to contribute towards private medical treatment, then in fact you would be better off by simply taking out a private medical insurance policy.
This is because the income protection and critical illness plans are more suited to helping you get by and keep up with day to day payments without having to work, whereas if you have an active private medical insurance policy, then the insurer will directly reimburse you for any medical bills.