Income Protection Insurance Cover
Find out how you can pay less for your income protection insurance cover...
What is Income Protection Insurance Cover?
Income Insurance provides you with cover or protection should you lose your income through an accident, sickness, or unemployment.
Insuring or Protecting your income can give you peace of mind that you will always have enough money to live on should you be unable to work.
Income protection insurance works by paying you a regular sum for a set period of time after you place a claim.
It is often paid as a lump sum each month instead of being tied to a particular debt such as your mortgage.
Who is suitable for Income Protection Insurance Cover?
Income Protection Insurance is not essential for all or something that every working person must commit to, and there's no obligation to buy it at any particular point in your life.
However an income protection insurance policy could prove invaluable if you fall ill, have an accident that leaves you incapacitates, or should you face redundancy or unemployment.
If nothing else, income insurance would provide you and your family with the security of knowing that if the worst was to happened, that you would still have some money coming in to cover your day to day living costs.
This is particularly useful if you have little in the way of savings or another source of household income to fall back on.
E.G. If you're an employee and become ill or have an accident that prevents you from working for at least four days in a row, you would be entitled to up to 28 weeks of statutory sick pay if your employer doesn't have a sick leave payment scheme of their own in place (your work contract should set out what you are entitled to).
This means that you are guaranteed to have a source of income for a few months after becoming ill, but if you are still unable to work after that point, you would have to turn to state benefits.
However, it's worth noting that at just £87.55 a week, statutory sick pay is unlikely to be enough to cover your basic living expenses.
Likewise if you lose your job through redundancy you may be entitled to statutory redundancy pay for a limited time, but this wouldn't usually be enough to replace your income completely and would not help if your unemployment was not due to redundancy.
This kind of temporary pay carries no guarantee that it will tide you over until you find another job, which leaves you at the risk of having to severely cut down your life style and reduce the amount that you can spend - and could lead to you having to default on your mortgage payments which would could put your home at risk.
Although there are several benefits you may be able to claim if you were unable to earn your own income, existing on these alone is unlikely to bring in enough money for you to maintain your current lifestyle.
This is where income protection insurance comes in. It would aim to continue you on the same financial level that you enjoyed, while you were in work.
If you are trying to cut costs income protection insurance cover may seem like an unnecessary extra, but if you shop around for a decent income protection insurance policy that provides you with the income protection cover you need at a price that you can afford, then it can be worthwhile having the back-up in place.
Having some kind of income protection insurance cover in place can be particularly valuable if you are self-employed, because you will be less likely to be able to cover the cost of living if you fall ill and can no longer work.
This is because you would not be in receipt of any statutory sick pay and would not be part of any employee-related insurance schemes.
In this case a regular payout from your salary insurance policy or income protection insurance cover would help to replace any of the money that you previously would have earned through self-employment.
What should I look for in Income Protection Insurance Cover?
The maximum amount that you would be able to claim through an Income Protection Insurance policy is usually an amount equivalent to the salary that you were earning after tax, minus the benefits that you would now be able to claim, although this does vary from provider to provider.
When you take out an income protection insurance policy you should be able to specify how much cover you need a month, at an amount that is generally up to 70% of your income. Therefore so would need to think about how much cover you would need to actually cover your living expenses, if you were no longer earning a salary.
Once you make a claim your loss of income insurance cover will continue to pay out until the date that you have selected for your cover to end, or the date that you return to work if this is sooner.
Many income insurance policies limit their maximum claim period to 1 or 2 years whilst other, often more expensive income protection insurance policies, will offer to pay out indefinitely if you are unable to return to work for a sustained period, usually for accident and sickness insurance policies only. Again, you would need to balance the income reassurance that you would require along with the affordability of the premiums, when choosing an income protection insurance policy.
There would also be a waiting period between when you first place a claim and when the policy will start paying out, of usually 30, 60, or 90 days.
This is something to take into account when choosing your income insurance policy.
If you have savings that will tide you over for a couple of months then a longer wait would not be too much of a problem for your day to day finances.
However, if you have very little in the way of financial backup then opting for an income insurance policy that kick in with a payment much more quickly could be a wise choice.
It is also a good idea to look for an income insurance policy that backdates any claims to the first day you became unable to work.
These will provide you with the most reassurance that you would be able to cover your living costs on an ongoing basis, even if you have to wait 30 days or so to receive the benefit.
Be sure to compare income protection insurance cover and shop around to secure the best insurance policy for your needs.
We would use our income protection comparison software for help on getting the best salary or income protection insurance cover, as possible..
Most Income Protection Insurance products will specify a minimum and maximum age at which you can apply.
The minimum age is normally 18 and the maximum usually extends to an average retirement age of around 60 to 65 years old.
Different Income Protection Insurance policies will have different restrictions, allowances and exclusions in place, so it is important to shop around and compare the features, benefits and terms and conditions of any salary or income protection insurance policy that seems suitable before making a decision.
Getting a few income protection quotes is essential and we can provide that service for you.
We can use our Income Protection comparison software to allow you to compare costs as well as allowances and restrictions in order to help you find the best income insurance policy for you and your circumstances.
*Important - Make sure that you check the small print of the policies available to find out under what circumstances they would settle a claim.
Some income insurance policies will only pay out if you find yourself unable to do any sort of work whatsoever, meaning you would have to be seriously incapacitated to qualify.
In contrast other income insurance policies will pay out if you are unable to do the line of work you carried out prior to your loss of income, so this is something worth checking before you settle on an income protection policy.
How much does Income Protection Insurance Cover cost?
Whilst the cost of insuring your income will often depend on the provider that you choose and the type of cover that you require, the cost of your premiums will also be based on a few common factors:
Amount of income to be protected - the amount of money that you want to cover with salary or income protection insurance will have an effect on how much you pay in premiums. The higher the sum that you wish to insure, the more it is likely to cost you in premiums.
Length of income insurance policy - you can usually select the length of time that you would like your income insurance policy to pay out for in order to replace your income until you can support yourself again.
Naturally the longer you wish the income insurance policy to pay out for, the more you're likely to pay in premiums to justify this larger pay-out.
Policy Waiting period - there will be a length of time between making a claim and the policy beginning to pay out to replace your income. The shorter you want this waiting period to be, the more you're likely to pay in premiums.
Backdated claims - if you are making a claim that is backdated, i.e. you wish your income protection policy to pay out from the point at which you became ill or were made redundant, this is another thing that can affect how much you would pay in premiums.
Other benefits - if, as result of losing your income, you can now claim other benefits such as Income Support, this would also have an effect on whether your income insurance policy would pay out.
Occupation - some jobs will be seen by a potential insurer as a greater risk than others, and more likely to contribute to an illness or cause an accident, or more vulnerable to redundancy for which you would make a claim.
If you work as a stunt person, for example, you would be likely to have to pay higher premiums than if you work as an office clerk.
Age - the older you are, the higher your premiums are likely to be because statistically you are more likely to fall ill to the point that you are unable to work.
Health - if you have a pre-existing health condition it is possible that a potential insurer would decide not to pay out for claims relating to these conditions; however, you should still be able to take out income insurance cover. The healthier you are, the more likely it is that you would be able to secure lower premiums.
Lifestyle - whether or not you smoke can sometimes play a role in the amount that you would have to pay in premiums as some insurers will offer preferential rates for non-smokers.
As with any type of insurance where the cost of premiums is proportionate to risk, it is always worth checking what different insurers define as 'high-risk'.
Different insurers may put the same job in different risk categories, so it is always worth getting more than just one income protection quote for your comparison.
If you are looking for budget income protection insurance you should shop around for cover. With dozens of insurers offering cheap cover, obtaining quotes from a number of sources is a good way to find the most competitive premium.
A second way to reduce the cost of your cover is to increase your 'deferred period'.
Generally speaking, the longer you are prepared to wait for your policy to pay out, the cheaper your premium would be.
However, always make sure that you have sufficient savings or financial resources to fall back on if you do choose to wait 26 or 52 weeks for your affordable salary or insurance protection insurance to kick in.
You could also consider reducing the amount of cover. Either reducing the percentage of your income that you cover or reducing your monthly benefit should have the effect of bringing your premiums down.
Ultimately, if you are paying for income protection insurance it is important that the policy will pay out if and when you need it to.
For this reason, when you compare income protection quotes you need to look for an income protection insurance policy that offers a compromise between affordability and the amount of cover you would need should you lose your income.
What else should I consider when making my assessment?
Income Protection Insurance won't necessarily cover you against every possible case of illness, accident, or unemployment, so it should not be seen as a fix-all insurance that will pay out if you are unable to work for any reason.
Because of this it is important to check potential policy exclusions and ensure that you are happy with these before signing up to any income insurance policy.
What is the best way to buy Income Protection Insurance Cover?
When you have decided that you would like to take out Income Protection Insurance, you should first do some research into the range of policies on the market to see what is available and what sort of cover might suit you.
By comparing different income protection insurance policies and policy providers, you would be able to get a good idea of what price you can expect to pay and how well covered you would be before you commit.
As tedious as it can be, reading the small print is essential when buying this type of income replacement insurance policy. One clause in your agreement could mean the difference between being able to claim and being without the income protection cover you thought you had bought.
Alternatively arrange an appointment with one of our income protection advisers and they can do a lot of the comparison work for you and provide you with some impartial advice.
What areas do we cover for Income Protection Insurance Cover?
As with all of our financial products and services we can provide a free consultation on income protection insurance to people within South Wales and the South West including the main towns and cities of Carmarthen, Llanelli, Swansea, Neath, Bridgend, Pontypridd, Caerphilly, Cardiff, Newport, Chepstow, Monmouth, Gloucester, Bristol and Swindon etc.
Ready to find out more?
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