All about income protection insurance

  1. What is income protection insurance?
    Income protection insurance is a financial product that essentially replaces your income if you can’t work due to  illness or injury. Basically, it could save you from running out of money when you need it the most!

     

  2. Why should I look into income protection insurance? 
    If you do fall ill or have an accident, your employer may give you sick leave (which could last only a few weeks). Or maybe you’ve got enough in savings or a big emergency fund to last you a while, or perhaps you’re even eligible for state benefits (which, by the way, gives you less than £100 a week!!).

    Just remember: your expenses will remain the same (if not more) even if you’re not getting any income for a while. Sick leave, emergency funds and even state benefits can help you financially, but for how long? Income protection will cover you for as long as you need it.

     

  3. In what scenarios will an income protection plan replace my income?
    Income protection insurance usually covers you if you can’t work, for any reason! So that could be for mental health reasons, it could be for a broken bone, and of course those scary things like cancer. Anything that stops you doing your day job will typically trigger a payout from your policy, but as always, do check your insurer’s policy wording in case they take a different approach.

     

  4. Ok the real question: What’s not covered by income protection insurance?
    As always, it’s a good idea to speak to a financial adviser about products like income protection insurance – let the experts explain exactly what is and isn’t covered! But just so you know, one of the most common things not covered by insurers is if you lose your job due to redundancy – so if you’re fired, sorry, you’re on your own. Income protection policies are really there to cover illness or injury.

     

  5. How much do I get paid if I claim on income protection insurance?
    Every insurer is different, but it’s usually between 50% to 70% of your income. Plus, you don’t have to pay any income tax on it – win!

    So say you earn about £30,000 a year and your policy covers 60%. That means you’ll usually get paid (60% of £30,000) = £18,000 over 12 months (or £1,500 every month for as long as you need it). Don’t worry, your insurer will do the maths for you, but it’s probably a good idea to check it yourself too so you know what to expect. Don’t know about you, but we think that £18,000 would definitely come in handy if we lost an income! 

     

  6. What does income protection insurance cost?
    All good insurance comes at a price! How much you pay for that protection depends on lots of things like your health, whether you smoke (or vape) and your type of job. Taking all these things into consideration means you get a policy that’s tailored to you (it’s called underwriting in the financial world).

    Usually, the riskier your job or the higher your health risks, the more you’ll pay each month (because insurers think you’re more likely to claim).

     

  7. Who sells income protection insurance?
    There are loads of insurers out there who sell this amazing product! Doing your own research online is a great place to start but we’d always recommend chatting to a qualified financial adviser if you do want to delve into the detail more and are considering buying a policy. They’ll make sure you get the perfect policy to match your needs.