Income Protection
What it is. Why you need it and if you have to have it!
What is Income Protection?
Income protection insurance pays you a regular income if you are unable to work because of sickness or disability.
These payments continue until you return to paid work or you retire. Income protection insurance is also known as permanent health insurance.
How much of my income can I Protect
The amount of income you can claim will not replace the exact amount of money you were earning before you had to stop work.
The calculations are done based on around half to two- thirds of your gross earnings from your normal job.
This is because some money will be taken off for the state benefits you can claim, and the income you get from the policy is tax free.
Can I claim straight away?
You usually must wait a minimum of four weeks, but payments can start up to two years after you stop work. (This is called a deferment period.) This is because you may get sick pay from your employer, or be able to claim statutory sick pay for up to 28 weeks after you stop work.
The deferment period will be stated in your policy documents, and you should check regularly to ensure this meets your ongoing requirements.
I have sick pay, do I still need it?
Sick pay has a limited term and doesn’t last forever.
An income protection policy can be set up to start once your existing sick pay finishes, for a specific period of time.
This could be for a fixed period from as little as one year right up until the end of your mortgage term or your retirement age.
🤔 Do I have to have it?
No. The only insurance that is a condition of your mortgage contract is Buildings insurance. BUT if you become unwell or disabled long term and can’t pay your mortgage because your sick pay has run out, then your home will be repossessed, so if you have the budget available for it, it is advisable to have cover in place.
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