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Income Protection offers financial protection for you in the case of you being unable to work due to illness or disability.
In this podcast, co-hosted by our Managing Director Kathryn Knowles, the financial journalist Kara Gammell talks about her experiences with income protection. She talks about how her mum and dad both fell ill whilst she was in her teens and how income protection allowed her family to maintain their standard of living, whilst allowing her parents to focus on their health.
To see the transcript for this podcast please visit the Practical Protection website.
What is Income Protection?
Income Protection Insurance provides you with a monthly income in the event you are unable to work. It is designed as a long-term benefit with policies paying anywhere from a minimum of two years right through to your anticipated retirement age.
If you are unable to work due to a long term illness or disability you may become dependent upon Statutory Sick Pay (SSP) to meet your essential living expenses. State SSP requires that your employer pay you £95.85 per week for a maximum period of 28 weeks*. How would you pay for your bills and food with this?
In order to be eligible for SSP you must have performed some work at the Employers before you became sick, had at least a four day period of incapacity to work (PIW), pay National Insurance contributions, have not already received 28 weeks of SSP during employment and have notified your Employer of the incapacity within the time period set in your contract (often seven days). You are also likely to be asked to provide evidence of your incapacity and this will probably be written confirmation of your health from your GP.
Income Protection Insurance is referred to in a number of ways: Income Protection, Income Insurance or Income Replacement Cover. The policy provides you with a tax free monthly income until your selected retirement age (usually between 50 and 70) if you are unable to work due to an illness or disability. Depending upon your budget and needs you can either insure your full nett monthly income or a portion of this amount.
The price of Income Protection policies are based upon your occupation, age, health, chosen retirement age and the amount of your nett monthly income that you wish to protect. Following the Gender Directive of December 2012, insurance providers are no longer able to use gender as a factor in Income Protection premium calculations.
When you apply for Income Protection Insurance you will be required to choose a deferment period for when you can start claiming on the policy. The longer the deferment period you have the cheaper your policy will be, however you need to consider how long you can practically manage on a reduced income before the policy benefit kicks in. You will be asked to choose between 4, 8, 13, 26 or 52 week period of deferment, which represents the amount of time you must be unable to work before you can claim. There are specialist insurance providers who can offer deferment periods of one day and one week, and if you would like more details of their policies please Contact Us.
If you are one of the lucky few who have an enhanced sick pay scheme with your employer, Income Protection Insurance can be used to top up any loss in your earnings if your illness continues. Enhanced sick pay schemes are often structured to provide your standard salary for six months followed by half pay to a maximum of one year. An Income Protection policy can be tailored to your needs, replacing half of your income at the six months period and then progressing to the full income benefit at the end of year one.
Income Protection Insurance is often mistaken for Accident, Sickness and Unemployment Cover (ASU). ASU provides short term cover for Accident, Sickness and Unemployment with a maximum benefit period between 12 and 24 months. To read more about the ASU policies that you can have please visit our Accident, Sickness and Unemployment page.
How does my Special Risk affect this?
This very much depends upon what your Special Risk is and the amount of cover that you are wanting to secure. Medical conditions, hazardous pastimes, occupations and foreign travel will all need to be fully disclosed to the insurance provider at the point of application. The acceptance terms of your application by the Insurer will be dependent upon the perceived added risk of your disclosure.
Income Protection Insurance will be underwritten with your details and you will be provided with acceptance terms of either normal (standard policy premium), special terms (increased policy premium and/or condition exclusions), or in extreme circumstances you will be declined cover. It is essential that you place your Income Protection Insurance application with an insurance provider who is most likely to offer you cover and at the best terms. This is where our years of experience in the insurance market comes to your advantage!
Cura Financial Services has been rated 5 out of 5 based on 500 reviews.
Review by Mark on 1st April 2016
“I was really dubious about using someone on the end of a phone but I have to say that these guys were just great. I was told by my local broker that I could not get income cover due to my job but not only did this company sort the cover but it was really well priced too. Highly recommended company.” - 5
You can read more of our reviews here.
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