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Income protection is a type of insurance policy that pays out if you're unable to work for any medical reason.
When you buy income protection insurance, you make monthly repayments (the premium) in return for a tax-free monthly payment (the benefit) if you make a claim.
Long-term back pain, cancer, depression and strokes are a few reasons why people may claim on their income protection insurance, and you can make multiple claims during the term of the policy. The cover protects you financially in a longer-term way than sick pay.
Our team have helped many people to find the perfect cover for them, whether it is life insurance, critical illness cover, income protection, or a combination of all three. Contact us today and one of our advisors will be in touch.
When considering income protection, several variables affect your monthly premium.
One choice you will have when choosing income protection is whether to go for a short or long-term policy.
With short-term income protection, you are protected for a shorter amount of time, with a maximum amount of time per claim when you will receive the monthly benefits. This is typically between 2 to 5 years per claim, and you can claim multiple times on the same policy even if the injury or illness is related to the original application. Short-term income protection is cheaper than long-term cover.
Long-term income protection means the period during which you receive benefits is the length of the policy term. This means you will continue to receive payments for the duration, assuming you are still eligible. As with short-term cover, you can make multiple claims during the term.
The typical maximum age for taking out income protection insurance is between 54 and 64.
The policy can then run until retirement age, with some insurers in the UK offering cover past 68 years old.
The majority of unsuccessful income protection claims are due to 'misrepresentation' when taking out a policy; you must be honest with the information you provide to avoid an unsuccessful application in the future.
When assessing an income protection claim, insurers consider the application based on your inability to fulfil the duties of your job - known as their 'definition of incapacity'. This varies significantly based on the nature of your role, for example, how physical or stressful it is, and feeds into what your insurer calls your 'own occupation definition'.
Should you be unemployed at the time of making your claim, there will be other factors that are considered, for example, whether or not you can use a car or your ability to walk. This is known as the ADL or 'activities of daily living' definition. Income protection cover doesn't take into account any loss of earnings that are not due to the injury or illness, for example, if you are made redundant.
You may find that there are other exclusions in your policy, for example, inability to work due to self-harm, or other items that are specific to your own medical history.
There are a few questions to ask yourself when considering income protection insurance.
Certain triggers encourage people to consider income protection insurance; however, the younger and healthier you are, the cheaper your cover will be.
Common reasons include:
Income protection cover may be more significant for the self-employed who do not have employer-provided sick pay.
If you are self-employed and are unable to work due to illness or injury, you may feel the financial impact sooner than those who are in employment.
It is common to confuse income protection with critical illness cover; however, there are some key differences:
Our team of experienced advisors can help you to find the cover that is perfect for you and your circumstances. Get in touch today to get started.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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