In very simple terms, income protection is an insurance policy that pays out a percentage of your monthly income if you are unable to work.

Income protection is different to life insurance or critical illness cover, both of which do not pay a monthly benefit, but instead give you one-off lump sums in the event of your death or the diagnosis of a critical illness.  That’s why it’s important to seek financial advice if you are thinking about getting cover.

How do I know if I need it? 

Here are some of the things you need to consider:

• What is your employer’s sickness policy, do you receive anything other than statutory sick pay, currently £96.35 per week*?
• Do you, or your partner or spouse, have sufficient savings to substitute an income if you are unable to work?
• Are you close enough to retirement not to need income protection?

Who could benefit from income protection?

In short, everybody, but if you work in a high risk profession, enjoy extreme hobbies, or if you’ve suffered an illness in the past and feel you may be at risk of being unable to work because of it, then income protection could provide peace of mind.

How does income protection work?

Income protection is an insurance policy, you pay a monthly or annual premium for it like any other type of insurance.  If you can’t work because of sickness, disability, or other reasons (depending on your policy criteria), you will receive a regular income until you either return to work, retire, pass away or the policy term comes to an end.

The amount that is paid could be anything from 60% - 65% of your pre-tax income, and payments, which are tax free, will start after a pre-agreed waiting period, which could be weeks or months. 

How are the premiums calculated?

As with any insurance policy to do with your life and health, your age, any health conditions, whether or not you smoke or vape and your occupation will be considered when your premium is calculated.  We also consider how much income you would like to receive, when you would like the payments to start and for how long.  Your premiums are affected by how much of your income you would like protected, how soon you need the policy to start and the term of your cover.

Our protection advisers will be able to give you advice and guide you through what type of policy works best for you, helping you find value for money as well as some assurance knowing your income is protected. 

*source https://www.gov.uk/statutory-sick-pay/what-youll-get