Income protection insurance makes sure you get regular income if you have lost income due to some illness or accident. Here’s how it works and helps.
There is enough struggle involved to keep paying our essential outgoings like mortgage and rent. This struggle would increase two times if due to some unfortunate circumstances you lose income due to any illness that strikes you or you experience some unfortunate accident. Having income protection insurance assures you of regular income till the time you retire or are able to return to work.
Income protection insurance: How does it work?
Income protection insurance works by providing regular payments if you’re unable to work as a result of any illness or accident. It continues to pay out till you can start your work again or you reach the end of the policy term, you retire or you die, whichever happens, sooner. The insurance covers most illnesses that impact you and you are unable to work. The policy pays out 50% to 65% of your income in the event you are unable to work.
Another important point about this policy is that you can claim it as many times as you need till the policy lasts. However, there are pre-agreed waiting periods of 4, 13, 26 weeks and a year. If you wait longer, your premiums also become lower.
When do you need income protection?
If you are unable to work due to any illness or some unfortunate accident, you may think that your employer will continue to support you with some income. The reality is that employees get moved onto Statutory Sick Pay within six months of being unable to work. There aren’t many employers who are willing or able to support their employees for more than a year if the employee falls sick. It is important that you know what kind of support your employer will grant you if you fall sick for an extended period.
What becomes important here is how much savings you have. But despite your savings, any loss of income could leave you in a challenging situation where it could be difficult to pay necessary household bills like mortgage/rent and utilities. And, if you are self-employed then it becomes even more difficult as there is no sick pay coming for you.
You may not need income protection insurance if…
There are situations where you may not require income protection cover if your sick pay would be sufficient to cover bills. If you have some employee benefits package that keeps your income going for the next 12 months or more then income protection insurance may not be required. Along with your employee benefits package, if your government benefits are enough to cover your outgoing amount per month then you are on solid ground.
There is also the situation where if you have sufficient funds and savings to support yourself for a longer period of time, then income protection may not be necessary. If you can take early retirement based on your resources then it is another reason. If your family or your partner is ready to support you if you lose work income, in such a situation also income protection insurance may not be required.
We hope we could share in this post some good points on income protection insurance in the UK. Do get in touch with your trusted insurance adviser for advice best suited to your life circumstances.
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