Income protection insurance refers to a group of insurance products that help you out financially, if you lose your income due to injury or illness. The COVID-19 pandemic has greatly increased awareness of the importance of having a safety net to fall back on in times of financial hardship.
Despite this, one of the best ways of strengthening your financial resilience – income protection insurance – remains poorly understood. Research1 suggests that nearly half of the UK’s working population (46%) have heard of income protection insurance, but don’t know what it covers or how it works.
How does it work?
In a nutshell, income protection is a type of insurance policy that ensures you receive a regular income if you’re unable to work due to illness or injury. It will usually pay out a percentage of your normal monthly income to help you pay your bills, rent/mortgage or essential living costs, taking the pressure off until you can return to work. Some types of income protection are designed to cover specific types of payments, for example your mortgage or credit card payments. There are two main types of income protection: long-term and short-term. The former will supply you with a regular income until you return to work, retire or die, whichever occurs sooner. The latter will pay out for a specified time period, usually six months to a year. Most income protection policies will have what is called a ‘deferral’ period, lasting some weeks or months before payments begin. The longer the deferral period, the lower your premiums are likely to be.
What does it cover?
In contrast to a critical illness policy, which only covers a strict list of specified illnesses, an income protection insurance policy will cover most illnesses or injuries that leave you unable to work (this will depend on the policy, however). Another advantage is that it can be claimed as many times as you need it for the duration of the policy term. Some policies will also cover redundancy or unemployment on a short-term basis, although it is currently more difficult to find suitable cover due to the coronavirus pandemic.
Do I need it?
In order to work out whether income protection may be suitable for your circumstances, it can be useful to ask yourself the following questions:
– Could I survive for more than a couple of months without my income?
– Could I get by on my employer’s sick pay/Statutory Sick Pay?
– Could I rely on support from my partner or family?
If the answer to any of these questions is ‘no’, then taking out income protection cover is likely to be a wise choice.
But which type do I need?
Still confused? Not to worry, we are on hand to help you select the income protection policy that works for you.
As with all insurance policies, conditions and exclusions will apply. 1The Exeter, 2021
Catch up on our other blog posts:
If you have a dog, you’ll know that they can be cute, loving… and a whole heap of trouble! Aviva1 recently backed this up when it revealed some of the company’s more noteworthy pet-related claims. From the pooch who turned on a tap and flooded his owners’...
By choosing to live just outside highly sought-after locations, analysis has shown that homebuyers could benefit from savings of up to 55%1, without forsaking their preferred location. Average savings come in at around 34% when locating five or ten minutes from a...
Are you worried about your finances? If so, you’re certainly not alone. According to a recent survey, 90% of households are worried about rising prices1. Financial worries can cause a great deal of stress and anxiety. In fact, nearly one in five people say they have...
Income protection insurance can be a cost-effective way of protecting yourself financially if you are unable to work due to illness or injury. What many people don’t realise is that taking out an income protection policy can have benefits beyond the financial....
Job interview, driving test, family life… the list of life’s stresses is, unfortunately, long and varied. New research has revealed, however, that buying a home comes out on top. Can’t Buy Me Stress 37% of recent UK homebuyers said that buying a house was one...
Nobody wants to think something bad happening to them. Perhaps it’s why so many people shy away from protection insurance – after all, it’s all too easy to think ‘it’ll never happen to me’. Unfortunately, ‘it’ can and does happen, whether ‘it’ be injury,...
Amid the backdrop of war in Ukraine and the spiralling cost of living, unpredictability is at the forefront of many people’s lives right now. The outlook for the housing and mortgage markets is no less uncertain. Taking a step back, however, it is possible to...
Mr. & Mrs. F, a retired couple facing a daunting financial challenge. Their interest-only mortgage costs had tripled, straining their monthly budget. Traditional residential mortgages were out of reach due to affordability checks, and the thought of selling their...
Unlock Your Dream Home: How Our Flexible Mortgage Solutions Helped Clients Secure a £1M+ Property in Sandbanks
In our recent success story, we assisted clients in turning their dream of owning a luxurious home in Sandbanks into a reality. With retirement on the horizon, they were eager to embrace a stylish lifestyle without compromising their financial stability. Leveraging...
In a heartwarming success story, we recently assisted a 76-year-old client facing a winter emergency. With her boiler malfunctioning, she found herself without hot water or heating, a challenging situation for anyone, especially during the cold winter months. Seeking...
(Your home may be repossessed if you do not keep up repayments on your mortgage)
We charge a fee for arranging and advising you on the mortgage. The fee will be dependent on your circumstances but will not exceed £499. (Our typical fee is £299.)
For Lifetime Mortgages/Equity Release the fee will be £799.
Our mission is to provide honest mortgage advice, whilst helping you save money.
Get in contact
Or call —02380224925