Protect yourself against losing your income through injury, illness or disability
- Income Protection Insurance protects your income
- Income Protection Insurance is the first insurance you should buy
- Income Protection Insurance pays out when you can't work
- Income Protection Insurance pays out when you are sick or disabled
- Income Protection Insurance is long term and short term cover
Ask any expert and they will tell you that Income Protection is the most basic and essential protection of them all. It's the cover that covers the thing that pays for everything – your income! If you think about it, without your income, or perhaps your partner's income, your finances are ruined, especially if that loss lasts for more than a few months. So don't insure your car, your boiler, your pet or life before you protect your income!
Even home-makers can get cover, because although there may not be an income coming in, a home-maker makes a valuable financial contribution to the household by caring for children and doing all the other jobs around the home. If you’re a home-maker (or your partner is), just think what would happen if you were sick or disabled. Who would look after the children? Who would look after the home? Chances are you’d have to pay for some help, or your partner might even have to give up work to support you. Either way, there will be a financial impact and this is why home-makers should also have Income Protection.
The best policies – and advice is essential in buying such an important cover – provide a tax-free monthly amount until your retirement date. The cover starts paying out after you have been signed off work for a period of time and the longer this is, the cheaper the cover becomes. This time period is determined by the sick pay arrangements you have with your employer, and your financial situation. Many people for example opt for a three month wait and plan to cover that gap from savings or help from family, friends or employer. You can check the cost for longer or shorter waits and also save money by reducing your retirement age or opting for a shorter term policy.
The reason everyone should have this income protection is because the State benefits system simply does not provide adequately if you are unable to earn and not being able to work due to ill health is a real possibility for us all. You are far more likely to be unable to work due to illness than to die, which is why income protection is more important to have than life cover. Some employers provide this cover (we think all should!) so check with yours, but if your employer does not, or you’re self-employed, this cover is vital.
The maximum level of cover you can buy is about half your current income, as the insurers want you to be incentivised to try and get better and back to work. Though because the insurance payments are tax-free the income you’ll receive is not far short of your net income normally. You can also choose to protect your cover against inflation. Income Protection primarily covers you against disability and sickness, but you can also opt for an additional unemployment cover too.
Don't confuse proper Income Protection with the many lesser types of policy that are often sold under the same name. These never pay out for longer than two years - normally it's one year only – and will usually not even pay out for the conditions that are most likely to cause you to be off work! These are also known as PPI, Accident, sickness and unemployment (ASU) or similar.