What is income protection insurance?
Income protection insurance is a long-term insurance policy to safe guard you if you can no longer work because you’re ill or injured.
- It replaces part or most of your income – if you cannot work because you become ill or disabled.
- It pays out until you can start working again – or until you retire, die or the end of the policy term – whichever is sooner.
- There’s often a waiting period before the payments start – you generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you wait, the lower the monthly premiums.
- It covers most illnesses and accidents that leave you unable to work – either in the short or long term (depending on the type of policy and its definition of incapacity).
- You can claim as many times as you need to – while the policy lasts.
Do you need it?
- According to the ABI, in the UK alone one million workers a year find themselves unable to work due to a serious illness or injury.
- It doesn’t matter whether or not you have children or other dependants – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.
- You’re most likely to need it if you’re self-employed or employed and you don’t have long-term sick pay to fall back on.
- Check what your employer will provide for you if you’re off sick with a serious illness.
Who doesn’t need it?
You might not need income protection insurance if:
- You could survive on government benefits – but they might not be enough to cover all your outgoings.
- You have enough savings to support yourself – remember that your savings might need to see you through a long period of time.
- You could take early retirement – if you’re near retirement age, perhaps you could afford to retire early. If you’re unable to return to work you might be entitled to take your pension early.
- Your partner or family would support you – perhaps your partner has enough income to cover everything the two of you need.
Please note this article is for information purposes only.