Income Protection

Business Protection

Income protection is designed to protect people who are working and who would lose part or all of their income if they were unable to work due to accident or sickness. It pays you a regular income if you can't work due to a sickness or disability and continues until you return to paid work or you retire. Income Protection policies are usually written to retirement age or 60 if earlier.

How does income protection cover work?

Income protection insurance will pay an income for a specified period if accident or illness prevents you from earning a living by carrying out their normal occupation; mostly payment periods of one or two years. It is designed to protect people who are working and who would lose part or all of their income if they were unable to work due to accident or sickness.

Income protection is paid tax free for each month(or part of a month) that the policyholder cannot work due to accident or sickness. Payments will stop when a policyholder returns to work, the benefit period ends or their death.

Income protection may be available from the first day when a policy holder cannot perform their normal occupation. However, it is quite common for there to be a period of time specified within the policy before a claim can be made; this is now as the deferred period. Deferred periods will usually be quoted in weeks from the date when the policy holder is first unable to work and will commonly be from 1 month to 2 years, the longer the deferred period the cheaper the policy will be.

Why choose income protection?

If you’re unable to work due to illness, you may be entitled to state benefits, but these are modest. That means you may struggle to meet financial commitments. If you are employed but are temporarily unable to work, your employer may have its own sick pay scheme, but even the most generous of these may mean a drop in income. If you are self-employed and fall ill, there will be no help and you will have to rely on your savings.

Income protection insurance can help to compensate for any shortfalls in your income, allowing you to keep up with financial commitments and maintain your current lifestyle. The most important commitments, such as mortgage or rent payments, energy bills and the food shop will all continue regardless of whether you can work or not. An income protection policy can provide peace of mind as well as a vital back up if something were to happen to you.

What affects the cost of Income Protection?

The main factor which effects your monthly premiums is the level of cover you want. That can differ, depending on your circumstances. For example, the cover needed by someone in their 20’s with no children will be different to someone with a family. Before looking into a policy, you should work out how much income you would need to carry on as normal and use this as your starting point.

There are several other variables which will affect your premiums, such as the desired deferred period, your age, gender, job, health, and lifestyle. Premiums are also affected by how you define ‘unable to work’. The premium will be higher, for instance, if you’re unable to do your regular job, but can do other work.

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Disclaimer: No information contained within this website should be construed as advice, you should seek professional advice based on your individual circumstances. This is based upon our understanding of the law of England & Wales and HMRC regulation and practice, both of which may be subject to future changes. (For residents of Scotland, Scottish Law and tax rates may be different)

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