Income Protection insurance pays out an income if you're unable to work because of illness or injury. Income Protection insurance aims to put you back to the position you were in before you were unable to work.
Income Protection Cover is a long term policy that provides cover for health related work absence and not redundancy. In the event of such absence, you will receive a tax-free monthly income that will be payable until your desired retirement age.

Income Protection Policies can be claimed on multiple times (even for the same illness/disability) and if you return to work at a lower salary following incapacity, you can claim a proportional amount of the policy. Income Protection is also known as PHI or Permanent Health Insurance.

The likelihood of being unable to work due to an illness or accidental injury is greater than you may think. Income Protection insurance pays a tax free monthly income up until your retirement age should you be unable to work due to illness or disability.

Most of us need to work to pay the bills. The mortgage, credit cards, electric, phone, water, council tax and the rest. Somehow, despite promises made about how computers would give us all lots of leisure, we seem to be working harder and longer hours, while there are no jobs for life. The bills don't stop arriving - even if we are very sick. Make sure you provide enough cover for all expenses, just covering the mortgage payments would leave most people in a financial mess, should a long term il Without a regular income, most of us would struggle to get by. If you are ill for a short period, you may be able to cope by dipping into your savings. Employers may pay some sick pay, but it will not be as much as you normally get. If you are self-employed, then no work means no income. Few of us could cope with being off work for 6 or 9 months.
 
If a serious illness, medical condition, or accident befalls you, then you may be unable to work for the rest of your life. Income Protection policies cover against this loss of income.
 
Many people see the need for, and buy life insurance. Perhaps the inevitably of death has an effect. Between when you start work and when you retire, you are much more likely to be off work for 6 months or more, than die.
 
You have a one in seven chance of being off work for 6 months due to illness or accident, during your working life. In an age of spin, you may think these are scare statistics from insurance companies. They are not; they are official government figures from the Department of Work and Pensions. Although health generally has improved, and less of us do hard manual labour, this has been countered by the increased speed of work and effect of stress. So that figure of one in seven has remained constant for the last 20 years.
 
Thankfully, medical advances do mean that some conditions, which were once incurable, can be cured or put into remission, enabling people to return to work. This may be a full return, or on a part time or lower level of work. You may be lucky and return to work after a few months or years, but that period without normal income can ruin your finances. Most Income Protection insurance policies include rehabilitation benefits, which would top up your income if you were for example able to go back to work, but only part time, or if you were able to work again but in a lower paid job .
 
You may expect the state to support you. You may get a small amount of benefit, but may have to go through unpleasant interviews, medical tests and a review of your finances. Sadly, with many fraudulent claimants, the state treats everyone claiming benefit with great suspicion, guilty until proven innocent.
 
If you are a specialist tradesperson, or professional, a serious injury may mean that you can work, but not in the profession or type of occupation you were used to. Politicians may dislike the blunt truth, but in the modern world, the state expects you to take any form of work on offer. They may even force you to go on training programmes, before they decide whether or not to give you a handout.
 
By law, an Employer must pay most employees statutory sick pay for up to 28 weeks. This will almost certainly be a lot less than your full earnings. Few pay for longer. If it is obvious you can never return to work, they may stop paying and terminate your employment. Not all employers pay willingly.
 
If you are an employee, check your employment contract to see whether your company automatically pays you if you are off sick for a few weeks or a few months.  

If you are not applying for the maximum available under the Income Protection policy, make sure you apply for enough cover to pay all your essential outgoings. Consider adding “indexation” to the policy as this will enable the cover to retain value against inflation.

Be careful if you are Self-Employed, Income Protection policies expect you to prove income in the event of a claim. For some Self-Employed people their “accounts” may not truly reflect their true income(especially within the early years of self-employment). In addition a Shopkeeper for example who has staff, would find it difficult to justify an Income Protection claim as the Insurer would take into account any “ongoing”  income and reduce a claim accordingly. Be aware as well that most Income Protection policy policies include the clause “following no part of his/her normal occupation” so even helping out by answering the phone, may cause a claim to be disqualified.  

If you want long term accident and sickness cover, then you need Income Protection
If you want short term cover or unemployment/redundancy cover, then you should consider Accident, Sickness and Unemployment Insurance.

An Income Protection policy does not allow you to make a profit out of your misfortune. So the maximum amount of income you can replace through Income Protection insurance is broadly the after-tax earnings you have lost less an adjustment for state benefits you can claim. This is usually translated into a maximum of 50% to 65% of your before-tax earnings.

As with all insurance, the trick to buying the right type is to consider exactly what it is that you need it to do for you. You need to have a very close look at the small print of any policy to make sure it will pay out when you want it to. 

These are general long-term income protection repayment policies designed to kick in between when your employer stops paying sick pay, and when you collect your pension. Income Protection policies are underwritten at application stage.

Most banks and building societies are tied to a single provider, so you only get one option.
Banks make a lot of money by selling various income protection products, with a mortgage or loan. A few deals are constructed in such a way that you cannot separate the finance and protection. Most deals offer you some cover, which tends to be priced on the high side, and may not suit your individual circumstances. Some even make you pay for it if you do not opt out, while others will suggest it is part of the overall deal. In practice, in the vast majority of cases you have the freedom to look elsewhere in the market for a cheaper and/ or more suitable insurance.

Payment protection insurance covers the repayments on a mortgage, loan or credit card if you are unable to work due to accident, sickness or unemployment. Many only pay for 12 months.

Income protection is longer term and wider protection although it doesn’t usually include redundancy cover.

Income Protection premiums are calculated based on your occupation, age, health, estimated retirement age and the amount/level of cover that you choose.

When applying for Income Protection Insurance, you will need to select a deferment period, this is usually 4, 8, 13, 26 or 52 weeks, and represents the amount of time that you will need to be off work before you can claim. Please note that we also offer deferment periods of 1 day, 1 week and 204 weeks, if you are interested in these options please Get an Income Protection quote now.

 

The aim is to find the best value-for-money cover, not the cheapest. A cheap Income Protection policy may offer "budget” cover: with limitations and restrictions.

A " budget " cover may be all you need, which is fine if you understand what you do and do not have protection against.

Critical Illness (CI) Insurance/Assurance pays out a lump sum if you suffer one of a number of specific medical conditions, such as a heart attack, cancer or stroke. However, it doesn't pay out for any medical condition, whereas Income Protection can if that illness prevents the insured person working.. Critical Illness is designed to pay a lump sum whereas Income Protection is designed to replace income lost through not being able to work.
For example Critical illness would not pay out for stress, depression or back problems.

Full Income Protection policies cover all three.
Stress and mental health problems have overtaken muscoskeletar and back problems as the leading cause of Income Protection claims.

There is a wide range of policies on the market, personal accident policies tend only to cover physical accidents. When extended to sickness, they usually mean illness. In addition these policies will usually pay for a maximum of 12 months (occasionally 24 months). Also these policies tend to automatically exclude previous medical conditions.

Income Protection policies will cover illness caused by stress or depression; personal accident and sickness policies rarely do.  

Be honest on your Income Protection application. If you have or suspect you have a medical condition, a history of problems, or are in a job, which is not acceptable to insurers, then there is a huge temptation to avoid telling the insurer this information.

Even if they do not specifically ask a question relating to something, which could be a problem, you must tell them. On critical illness policies, some claims in recent years have been turned down as the customer omitted the full truth. Thankfully, the income protection industry is not anywhere near that figure. However, many insurers are very tough on people who fail to tell the whole story. If found out, they will certainly refuse to pay all or part of the claim, and may even prosecute you for attempted fraud.

" Non-disclosure" could lead to a claim being denied, just when you need the money the most.
Mention any and all aspects of your medical history, and leave the insurer to decide which are trivial and which are important.

If they have a query on a possible problem they may seek to increase the Income Protection premium or impose limitations on cover. They may also insist you have a medical check up.

Sending customers to doctors is both time confusing and expensive, so an increasing number of Income Protection insurers are using tele-underwriting.

Tele-underwriting may be used whether you buy direct or via an advisor. The aim is to avoid confusion, and seek ways of offering you a policy, by a specialist underwriter with medical knowledge conducting an in-depth conversation with you by phone. Insurers are finding that tele-underwriting is more effective at gathering medical information, than a detailed proposal form. 

This is an area that causes a lot of confusion, even to insurance experts.
When an Income Protection insurer decides whether or not to pay your claim, it needs to decide whether you are unable to work. However, some income protection policies require you to be unfit to pursue your own occupation, whereas inferior policies insist that you can only receive benefits if you are unfit to pursue any occupation.
"Own occupation" clauses are far less onerous than "any occupation" clauses, because you may be unfit to do your job, but could, for instance, collect trolleys at the supermarket.
There are three main definitions of being unable to work:

Own occupation: is the most expensive, but the best. You tend to get this automatically if you are in a non manual occupation. Some Income Protection Insurers will give “own occupation” definition for even heavy manual workers.

Suited occupation sounds very similar to own occupation. Insurers may try to argue otherwise, but in real life, it is very hard for anyone with a policy with a " suited occupation" definition to argue that they should not take any low paid work on offer. Basically, if you can read and write, you can get a minimum wage job; modern Disability Laws mean that employers should not turn away people who have become disabled in any way.
For policy profiles, “suited occupation " has been regarded as “any occupation “; the theoretical differences vanishes on real claims.

The more honest  " any occupation " Income Protection definition has the problem that if you are a skilled worker or professional who has an injury which means you can do some work at a lower salary but not your previous, work, then the policy does not pay up. Insurers do not pay the difference between your former salary and your new one; while getting state benefits will be difficult.

If during the term of your policy you change occupation, you must usually tell the insurer. If you were a shop assistant when taking the cover out, but are a roofer or fireman when you claim, insurers may not pay up. 

I am self-employed, can I get Income Protection?

Depending on what you do, you may have income coming in from earlier work, even if ill for several months.
The self-employed can take out individual Income Protection policies rather than business ones, but must check on what basis the insurer will pay out.

A typical basis for payment is your pre-tax share of the gross profit after deduction of trading expenses, in the 12 months immediately prior to the date of your incapacity.

Some Income Protection policies operate an average over the last 3 years as they realise that self-employed people often have a fluctuating income and it is unfair to penalise you if the year before your accident was unusually bad. 

Getting a quote is simple and easy, we search the market for the best prices and allow you to apply yourself online, or if you prefer you can speak to one of our Qualified Protection Advisors, who will provide advice at any stage of the process of obtaining income protection insurance.