Income Protection
Falling ill or becoming injured during your working life is not something you want to imagine. Let alone worrying about how you are going to provide for your loved ones. This can feel particularly worrying if you have a marital partner or children (or both). But, income protection insurance can provide a lifeline for those unfortunate events that you cannot predict.
Income protection insurance is designed to protect you in the event that a serious illness or injury is preventing you from earning an income.Once you claim, income protection pays out regular payments to your bank account, mimicking the likes of a salary payment. These payments ensure that you can continue to receive a regular income until you are able to start working again or until you retire.
Income protection is different to most other forms of insurance, as it will pay out as many times as you need it to until the policy runs out. However, the payments are not issued to you straight away, there is usually a waiting period in which you are expected to use sick pay from your employer. This can be beneficial as the longer you wait for the payments, the lower your monthly premiums will be.
Do I Need Income Protection Insurance?
There are so many insurance options to consider, it’s difficult to know which ones are worth it. But, it all comes down to your personal preference and circumstance, what’s right for one person may not be right for another.
If you’re pondering over income protection insurance, it’s worth taking a moment to consider your life without any income – because sick pay doesn’t last forever. Even if you don’t have people that depend on you, you still have bills and mortgage payments that need to paid on time each month, and without an income, how will you do it?
It’s worth noting that not everyone is entitled to sick pay, especially if you are self-employed. If you are employed by someone else, you should check with your employer if you have the option to take sick pay, as depending on the severity of your illness or injury, this may sway you away from the idea of income protection.
According to the Association of British Insurers (ABI), 6.6m households would see their income fall by more than half if the principal earner left work – something that could be avoided with income protection cover..
How much cover do I need?
This can depend on your aims for the policy, your current expenditure and also if you would be in receipt of any employer benefits. Plans will not be able to pay out if you are in receipt of full sick pay from your employer for example. We would tailor the plan to tie in with this so that this could not happen.
It is likely that we would look to cover as much as your income as possible, but depending on your overall protection solution it may be recommendable to purely cover your essential outgoings.
Your Regal Finance Group expert will be able to run through your budget with you and recommend the most suitable level of cover.
What is the deferred period?
The deferred period is the pre-agreed period of time that must elapse between putting in a claim and the benefit being paid. A longer deferred period will result in a lower premium. Your deferred period can be from as short as 1 month up to 13 months with most insurers.
If for example you receive 3 months full pay from your employer then we would look at your Income Protection paying out at the end of this period.
How can I make my plan cheaper?
Less cover is less expensive, and a longer deferred period does reduce the premium. There are also some ‘budget’ option plans available that will pay out for a maximum of 24 months rather than ceasing at plan expiry, return to work or in the event of death. These can prove to be very valuable within an overall solution to your protection needs.
How Much Does Income Protection Insurance Cost?
The exact amount you pay for income protection insurance will depend on your personal circumstances, but there are a few factors that can influence the cost of your income protection premiums.
- Being a smoker is likely to increase the price of your premiums because smoking can increase the likelihood of illness, making you more of a risk to an insurer.
- Depending on the type of job you do, your premiums can be higher than average, particularly if your job is deemed ‘dangerous’ (e.g. if you are a scaffolder). This is because the chances of you becoming injured are much higher than those in a low-risk job.
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What Makes Income Protection Different?
Income protection insurance can often be mistaken for critical illness cover as they are both based on insurance in the event of illness or injury, however, there are a few distinct differences:
- Income protection does not pay out as a lump sum, instead, regular payments are made to mimic the salary you would have originally received from work.
- You can claim as many times as you like with income protection (for as long as the policy lasts), even if you have already received a payment from a previous injury.
Income protection insurance is extremely worthwhile if you become seriously ill or injured and even if you are currently fit and well, you cannot predict what the future will hold – it’s better to be safe than sorry.
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