Income Protection Insurance
Income Protection is an insurance cover that is seldom spoken of, but it is actually the most essential policy, every working individual should consider. An Income Protection cover will protect you in case you fall ill and/or unable to work, providing for you and your loved ones.
Why should you choose Income Protection Insurance?
Income Protection Insurance gives you and your family peace of mind, so you can rest assured that your regular monthly bills, such as mortgage, rent, utilities, loan repayments and groceries, are taken care of should you no longer receive a regular income due to accident and sickness.
Since the chances of you falling sick and being off work is higher than you actually passing away, it is one of the most practical insurance covers you can own.
Income Protection Insurance cover is a contract and a promise that won’t change over time, unlike state benefits which can/will change according to the policies of the incumbent government. Plus current Statutory Sick Pay is only just £95.85 per week!
How does Income Protection Help?
It is up to the recipient to see how Income Protection can help them in, but normally it would be such as those mentioned below.
- Mortgage payment
- Loan payment
- To pay utility bills, council tax and food bills
- Peace of mind that you can look after dependents
- The ability to maintain your standard of living
Is Income Protection Insurance Tax Deductible?
Premiums can also be paid from your business account which helps you save on corporation tax.
Which leads to a reduction in your premiums and usually the pay-out is free of income tax.
Short term or long-term income protection?
Depending on your needs, you may choose either short term or long-term income protection cover.
Short-term income protection typically covers any lost earnings through illness or injury that leaves you unable to work.
Long-term income protection is better suited for more serious circumstances, which leave you unable to work for a much longer period, usually owing to sickness or injury. Long-term protection can cover you all the way to retirement age.
How much should I pay for Income Protection Insurance?
How much you pay depends on your Age, lifestyle, health and also Benefit Amount & The waiting/Deferred Period
Benefit Amount
This is how much the claim pay-out will be each month, should you find yourself out of work for Accident, Sickness. The maximum amount you can claim varies on your income and which insurer you go with. The maximum amount is generally 60% of your annual income or capped at a certain amount set by the insurer. For example, if your annual income is £50,000, the maximum benefit amount could be £2,500 per month. When choosing your benefit amount, it is wise to look at your lifestyle and how much you will need to get by as this will effect your monthly premium.
The Waiting Period
This is how long you need to wait before the claim pay out begins. The waiting period can also be called the deferred period or excess period, dependent on the insurer. The waiting period offered is different for Accident & Sickness. With an Accident & Sickness policy you can choose to be paid within 4 weeks, 13 weeks, 26 Weeks or 52 weeks. This could fall in line with any sick pay you are entitled to, or the period you feel you could support yourself.
Do you need an income protection plan?
You might have savings to fall back on, an adequate sick pay package provided by your company or Statutory Sick Pay given by the Government that’ll cover illness in some circumstances.
But Income Protection will help you to maintain your lifestyle and pay the bills if you can’t rely on these, either in the short or long term.
Bear in mind though that it’ll only cover a percentage of your income that you specify when you take out the policy, up to 60% of your salary.
What is statutory sick pay (SSP)?
Statutory sick pay, or SSP, is the minimum you must legally be paid if you’re off sick from work. It is paid to employees of companies.
The standard weekly rate for SSP is £ 94.25 a week, while you’re on sick leave. In general, sick pay is paid
on your regular monthly or weekly payday. Since sick pay rates are likely to be much lower than your
usual wages, you may want to consider an income protection insurance policy to cover your wages if you are unable to work due to illness or accident.
How long does your benefit last?
Usually your benefit payment stops as soon as one of the following happens:
- You return to work
- You reach the maximum benefit, depending on the policy.
- You pass away
Why do you need to take our expert advice?
Without a regular income, you/your family could be struggling to pay monthly bills and provide for the day-to-day essentials; so, this is one insurance cover you most definitely need to have.
We will help you prioritise and customise your cover depending on your budget and requirement.
Stop worrying about being unable to earn. We’ve got you covered!
