Income Protection

An income protection policy is not designed to fully replace all of your income and typically insurers will provide cover for up to 65% of your annual income. Income protection is designed to pay essential living costs, rather than fully replace your lifestyle.

Look at the maximum amount you could have, but bear in mind you don’t have to take that. You might only need £1,500 a month in order to ensure your mortgage/rent and essential outgoings are covered. A professional adviser will help you to look at how much you need every month to pay the mortgage, gas, electric and water bills, as well as food and council tax. You might have one partner that earns a lot more than the other partner, so think about which person needs the cover most and take advice, because it’s such a complex thing.

The cost of income protection insurance can vary based on several factors such as the level of coverage, waiting period, age, health status, and occupation. Policies with higher coverage and shorter waiting periods tend to be more expensive than those with lower coverage and longer waiting periods.

Other factors that may affect the cost include the insurer’s underwriting process, any exclusions or limitations and location. Some insurers may offer discounts for bundling multiple policies or being a non-smoker. It is essential to review the policy carefully to understand the costs involved, including any ongoing premiums, fees, and charges.

Insurers generally offer income protection insurance to self-employed individuals who work more than 16 hours per week. Income protection can be crucial for self-employed individuals as they typically do not have access to sick leave or other benefits provided by an employer.

However, eligibility and the coverage amount may vary between insurers, and self-employed individuals may need to provide additional documentation to demonstrate their income and financial situation. It is essential that we check with potential insurers to understand their specific requirements and any exclusions or limitations that may apply to self-employed individuals.

As income protection is based on your current earnings and some insurers may want you to provide proof of your earnings at the onset of the policy. They may want to see a pay slip or a contract, which means it’s quicker when it comes to making a claim.

Other insurance providers want to see the proof of income when you make a claim, so you have to provide proof at that point. You have to keep the insurer updated if your job changes, or if your benefits change and you don’t need the deferred period to be as long or as short.

The category of your job is very important when it comes to income protection. If you’re doing a high risk job such as a scaffolder, your risks will be much different to an office-based worker who is sitting in front of a computer, therefore the premiums to protect that income are going to be very different. It may affect your payout if anything changes and you haven’t informed the insurer.

Income protection does not cover redundancy. It only covers you if you cannot work due to accident, sickness, illness or injury. If you want redundancy cover it can be arranged separately, but it is not a part of income protection.