Insurances – Income Protection

income protection insuranceWe don’t like to think that anything bad will happen to ourselves or our families, however each year according to the ABI study in Sept 2014 around a million people are forced to be off work due to a serious illness or an injury of some kind.

 

Think about it for a minute. If you had to be off work because you had a serious illness or you had an injury which meant you couldn’t do your job, how would you or your family cope with the loss of income? Your employer may have protection which will enable them to pay you sickness pay. However, this could be a fraction of your salary.

 

According to reports from Personnel Today, just 12% of employers support their staff for more than one year if they are off sick. The Government’s website says about Statutory Sick Pay is that the minimum an employer has to provide after three continuous sick days, is only £88.45 a week for a maximum of 28 weeks.

 

So, how would you pay the monthly bills? Some people rely on government benefits, but will they be enough to cover your bills?

 

One way of doing this is to take out Income Protection Insurance.

 

Income Protection Insurance is a long term insurance policy that will help you if you have a serious illness or injury. This starts after your sickness pay has stopped from your employer.

 

It is different to Critical Illness insurance, which pays out a lump sum if you have a specific illness. The Government’s website states that most common causes for income protection claims are for illnesses that would not be covered under Critical Illness policies.

 

Income Protection is:

  • Long term. You can get cover for 1yr, 2yrs or until you retire.
  • It replaces part of your income if you cannot work at all. It’s based on a percentage of your salary, the usual amounts are 50% or 70% and payments are tax free.
  • It will pay out until you start working again or until the end of the policy, you retire or the worst case scenario that you pass away.
  • You have to wait a period of time before the payments start, called your deferred period, which is pre-agreed when you take out the policy. It is usual that these payments do not start until your sick pay stops or other insurances stop paying. The longer you have chosen the waiting time to be, the smaller your monthly policy payments will be. The usual time is around 4, 8, 13, 26 or 52 weeks.
  • It will cover most illnesses that leave you unable to work (you need to check the policies as they all differ)
  • You can claim more than once from one policy while it is still valid.

 

It is worth checking with your employer before you apply for this insurance just in case their sick pay would be more than enough for you to live on.

 

Think about the long term, would your employer’s sick pay cover your income for 12 months or more? If not, then it is worth getting advice as to the best protection you can get for you and your family.

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