Income Protection Insurance

What is income protection insurance?

Income protection insurance is designed to provide a replacement income for you when you are unable to work for a period due to sickness or accident.

Income protection insurance will pay out after an initial period, called the deferred period. Typically this will be 1,2,3,6, or 12 months. The longer that you are prepared to wait before a payout, the cheaper the premiums will be.

Income protection insurance is therefore different to critical illness cover. Critical illness cover would provide a lump sum, while income protection insurance would provide an income. Typically, this would pay until the earlier of your retirement age, or you being well enough to return to work.

Most income protection insurance will insure up to a maximum level, and this will always be less than your actual earnings, since the company will not want you to be in a better position not having to work. However, the benefits are usually tax-free.

The premiums for income protection insurance vary enormously depending on your age, occupation, sex and health. You can select the level of benefit that you require, and can usually have this increasing year on year to take into account the effects of inflation.

One of the main benefits of income protection insurance is that it will pay out more than once. This could mean that if you become too ill to work, and never go back to work, you should continue to receive income for the rest of your working life. WHen you take into account the lack of money provided by the state, this money could be your only real source of income in your time of greatest need.

To find out more about income protection insurance, please contact us.