Home Companies Essential Guide to Income Protection

Essential Guide to Income Protection

by GBAF mag
Editorial & Advertiser disclosure

Income protection is one of the most talked about insurance policy in the UK. In recent years, the number of people purchasing this policy has been on the rise. As more people became aware of the benefits, the number of claims decreased dramatically. This has led to a boom in the number of policies being sold. As a result, the amount of people wanting to know how to find the best income protection has also increased.

Income protection provides an income each month to replace any income that would have been made if the employee had not been unable to work for a period of time due to illness, accident or redundancy. The benefit usually replaces the entire amount of salary which is equivalent to forty percent of the standard rate of pay for the period of notice. This means that while you can enjoy some wage replacement, the loss of the income of the employee will still leave you with enough money to cover your mortgage, utility bills and the day-to-day expenses of living. Income protection policies were originally introduced by the government to help protect employees who are owed salaries by employers but were unable to return to work due to illness or redundancy.

Today, many employers offer disability insurance and income protection as a package, often at the same time. For employers looking to cut costs, this is sometimes the cheapest way to meet their obligations. If you purchase this type of policy as part of a package from a large, well-known insurer you can often get a cheaper quote online. There are websites that can compare a variety of policies and show the cheapest premiums for the level of cover you require.

When you’re looking for cheaper quotes for income protection, you should look at whether you need to take advantage of sickness and accident cover. If you already have a sick pay and are offered this as part of a package, then by all means take it. If your employer provides this as part of your employment contract, you could save money in premiums by opting out of these premiums and taking out cheaper policies that don’t provide any sick pay. The benefit could be worth quite a lot of money over the course of the year.

Critical Illness and Injury cover, on the other hand, are designed to payout if you’re injured or become ill during the course of working hours. As you might expect, these policies pay out more for each claim, but if you can afford a policy with higher premiums you should always choose this route. You may also need this level of protection, if you have dependants or children. Although you won’t be able to claim back the cost of the cover, the payout will help to ensure that your family gets help in financially hard times. As with any other type of life cover, the cost of critical illness and injury protection will vary greatly depending on your age and the amount of time you’ll be out of work.

Another factor to consider is whether to include a lump sum in your income protection policies. A lump sum payout is usually only available if you’re at least 45 years old, but some policies offer the additional option of allowing you to defer the amount you claim back until such time as you’re older. The benefit from deferral is that you can reduce the size of the lump sum you claim back, which will usually reduce the premiums you’re required to pay. However, this isn’t always the best solution because you may not get the lump sum you were hoping for and it may take years to recoup your losses if you do opt to claim. It’s important to weigh up the difference between a lump sum payout and a deferment, however, because you may find that a lump sum policy is cheaper overall.

Once you’ve decided on the level of income protection you require the next step is to start shopping around. The cost of cover can vary drastically between different insurance companies, so comparing several quotes is essential before committing to a policy. Make sure you look at both the cost of premiums and the level of cover offered by each insurer. You also need to identify how flexible the insurance company is when it comes to claiming bonuses and the amount of time they take to process claims. Some insurers are known to be particularly fussy when it comes to income protection, whereas others have been more competitive and are able to cope with higher risk clients.

When looking for income protection, it’s important to be honest about your circumstances. Don’t try to overstate your disability or illness in order to receive a larger payout. If you’ve had a recent accident or illness that has kept you from working due to your illness, you might not be eligible to claim under your own policy. Instead, talk to an advisor who can help you work out the best protection for you given your circumstances. If you’re unable to continue working due to illness, it may be worth getting another policy so you’re not left without income protection if another incident occurs.

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