Income Protection Insurance is a long-term insurance policy that is designed to assist you when you are unable to work due to illness or injury. It replaces part of your income if you cannot work due to illness or due to disability and will do so until you can start working again, the policy ends, you retire or you die – whichever happens sooner.
This type of policy does not cover the life assured against death but it does pay out a regular income when you are unable to work.
There is usually a deferred period (a period of time that has to pass before the policy starts to pay out) and the longer the deferred period you choose, the cheaper the premiums you pay. A longer deferred period also ensures that people who are only on a short term sick will not be able to make a claim on their Income Protection policy.
What does Income Protection cover?
Income Protection will cover you for most illnesses that render you unable to work, you can claim as many times as is necessary whilst the policy is in place.
Do you need to consider Income Protection?
If you could not pay your bills/mortgage or rent if illness were to leave you unable to work then you should seriously consider Income Protection. For anyone who is self-employed this may be critical and for those people who are employed but would not be entitled to sick pay via their employer, it may also be a very important policy to invest in.
What is the cost of Income Protection?
The cost of your Income Protection policy will depend on the policy type you choose and your own specific circumstances. Due to the fact that Income Protection insurance offers you cover for different illnesses and situations it is possible that the policy could pay out over a number of years. For this reason the premiums are not as low as other policies such as Life Insurance.
The cost of your policy will directly reflect your age, whether you are currently a smoker or have previously smoked, your health and your families medical history, your weight, your occupation and your income/ the percentage of your income you would need to cover.
What exclusions will apply?
If you have a pre-existing medical condition prior to applying for Income Protection policy the insurance provider may either decide to exclude cover relating to this condition or charge an additional premium to cover the risk associated with it.