What is Income Protection?
Sickness and accidents are both things that we hope not to experience in life, yet if they do, you want to ensure that you’re protected. Income protection describes a type of plan that is designed to provide financial safeguards in the event that your regular income is impacted in some way.
This could occur due to accident, injury, sickness or other circumstances that prevent an individual from working.
Income protection will ensure that a proportion of the policyholder’s income is replaced – this can be tailored in conjunction with your existing employer’s sick pay, however up to a maximum amount (around 60/70% dependant upon the provider). If you are self-employed or have no sick pay, this could be even more reason why this area of financial planning is so important.
Some key points for income protection;
- It replaces part of your income if you can’t work for a while because you’re ill or disabled.
- It pays out until you can start working again or until you retire or the end of the policy term whichever is sooner.
- There’s a waiting period before the payments start. You generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you wait, the lower the premiums.
Please note that individual policies from different providers can differ.
There can be various factors involved with finding a suitable policy – not just cost, these may include:-
- Statistics on payouts from the provider
- The insurer’s underwriting policy
- The provider’s financial status and stability
- Standard exclusions
- Indexation Options
Typically an income protection policy may last for the duration of an individual’s working career up until retirement. This solution differs from critical illness cover due to the above reasons but also critical illness cover would generally pay a lump sum payment, whereas this would provide a regular income replacement.
The type of product that will be best for you will largely depend on a range of personal and financial factors, so if you’d like to learn more get in touch for an obligation-free chat about your specific needs by filling in the form below or contacting us on 01603 964076