FAQS – Income Protection

See our main page on Income Protection Plans

How does Income Protection work?

If you cannot work due to sickness or illness over a long term basis, this type of policy will protect your earnings. Although, short term Income Protection is available, usually Income Protection pays out until you return to work, or until retirement or death.

Why would I need Income Protection?

If you cannot work due to illness, this type of policy will ensure you still have a monthly income so you can pay your bills, mortgage, and any other financial commitments. Whether you are employed or self-employed, Income Protection is an important benefit.

How much of my income would be covered?

This can vary depending on the insurer – usually, 70% of your gross salary would be protected. It is designed to lessen any financial difficulties you may face by providing a replacement income.

What’s the process if I want to make a claim?

In the first instance, you would need to contact your insurer to make a claim. They will guide you through their process so you can authorise the claim.

Would an Income Protection policy cover redundancy?

There are specific short term policies that can cover you for redundancy – however, standard Income Protection insurance would not cover you for redundancy. Please speak to one of our advisers who will be able to advise you on a suitable policy.

What’s the difference between Income Protection and PPI?

Although it is a form of Income Protection, PPI provides cover for credit cards and loans etc. A standard Income Protection policy offers support by providing you with a percentage of your salary. It is designed to make sure you do not experience financial hardship as a result of not being able to work, and can be used to cover your household bills and expenses unrestricted.

What is the cost of Income Protection?

This depends on the policy options you choose including the amount of benefit, the deferred period, and how long you would like the policy to be paid for.

What percentage of my salary will Income Protection pay out?

Depending on the insurer, this is usually 70% of your gross salary, which can be paid for a specific period, e.g. 1, 2 or 5 years. Plus, Income Protection could pay you up to the standard retirement age.

What does the term ‘deferred period’ mean?

The length of time you must be absent from work due to illness before the benefit is paid by the insurer is called a ‘deferred period’. The longer the deferred period is, the cheaper the premium will be.

Are there any other types of Income Protection available?

In the UK, there are various types of Income Protection, which include sickness, accident, and unemployment policies. Short term policies usually pay out over a shorter duration e.g. over 6 – 12 months. Long term policies usually pay out until you return to work, retire or die.

What are the minimum and maximum levels of benefit available?

The minimum amount to consider should include cover for your general living costs, household bills, mortgage or rent, and any loans, etc. The maximum amount of benefit is usually fixed by the insurer.

I am self-employed – can I be covered for Income Protection?

Yes, if you are a sole-trader you can be covered for up to 70% of your profit before tax is applied.

Would I be able to take out Joint Income Protection?

No, you would need to take out an individual policy as Income Protection is designed to cover your own income – it is not available as a joint policy.

What’s the difference between Critical Illness cover and Income Protection?

If you are diagnosed with a Critical Illness, this type of cover will pay out a lump sum, whether or not you are able to return to work. As a comparison, should you be unable to work due to illness, Income Protection helps to cover you for the resulting loss of income.

What does the term ‘occupation classes’ mean?

This is how an insurer assesses the type of risk your job poses to your health. Higher occupation classes usually result in higher premiums, and lower risk occupations will have lower premiums – Class 1 occupations are low risk whereas Class 4 is classed as a high risk occupation, e.g. a fireman etc.

After I have made a claim, what happens if I return to work?

The benefit will stop – however, many companies will allow you to claim a proportion of your benefit to make up the income you have lost, if you return to work at a lower rate of pay.

I am planning a career break – how does this affect Income Protection?

Cover and premiums can be suspended and resumed on your return to work for a pre-agreed amount of time. Most insurers now offer “non-working” or “career break” options; in this instance, they would not require further evidence of why you have stopped working.

Is there a limit for the number of times I can claim?

No – however, if you opt for a limited benefit period of e.g. 5 years, the benefit will be stopped once you reach this limit. There is no limit to the number of times you can claim but, in some cases, the deferred period may be waived. This is usually when you have returned to work after a claim and then, within a short period of time, suffer a recurrence.

What happens to my Income Protection if I decide to change my job?

You may need to inform your insurer – this can vary depending on the provider. However, it is always a good idea to review your level of cover if your salary changes.

How does the term “own occupation” define incapacity?

Should costs allow, this is the preferred definition applicable for most occupations for practical and medical reasons. The policy will pay out if you cannot perform the duties of your “own” job. The term “Any occupation” will only lead to a benefit being paid if you cannot undertake any job for which you are considered suitable.