Do I need Income Protection?

If you’ve never considered Income Protection Insurance before, it’s a good idea to think about how you’d cope if your income were to stop unexpectedly.

In an ideal world, it’s not something any of us would have to worry about, but it’s impossible to predict what’s around the corner.

Even if you’ve been in the same steady job for a number of years, or have never had to take any length of time off work due to illness or injury, there’s nothing quite like peace of mind.

Recent research shows that as many as 41% of people in the UK will be made redundant, or need to take time off work because of an illness or injury during their working lifetime, and what’s more, a quarter of households have less than £95 in savings to rely on.

Of course, if you are made redundant, there is the option of Job Seeker’s Allowance. However, at less than £75 per week for adults over 25, this isn’t likely to cover even the most basic outgoings, let alone mortgage or loan repayments.

In the case of accident and sickness, workers in the UK are entitled to Statutory Sick Pay (SSP), and although some employers also offer company schemes, an increasing number don’t supplement the government minimum.

So, at a weekly rate of just £94.25, paid for up to 28 weeks, this would leave many people in a difficult financial situation. Luckily, there is something you can do to prepare for the unexpected.

Covering up to 65% of your gross monthly income for a maximum of 12 months per claim, Income Protection insurance acts as your own personal safety net.

If you’re made redundant or suffer an illness or injury that stops you from working, all you need to do is contact our claims team to tell them about your circumstances.

When you make a successful claim, you’ll receive a tax-free monthly benefit straight into your bank account, which you are free to spend however you choose.

Many of our customers use the payments to cover their rent or mortgage, or loan repayments if they have one, but there are no restrictions on how you use the monthly benefit.

To qualify for Income Protection insurance, you just need to be aged between 18 and 64, and a permanent resident of the UK, Channel Islands or Isle of Man, working full-time (over 16 hours every week).

As long as you’ve been working for the same employer for at least the last 6 months, and you can prove that you’re not subject to an ongoing enquiry or disciplinary procedure, you should be able to purchase a policy that covers you for unemployment.

You’ll also need to be able to confirm that at the time of buying the cover, you weren’t aware of any risk to your job, or impending redundancies in your place of work.

When you buy unemployment insurance, you must get past the Initial Exclusion Period (IEP) before you can make a valid claim. Depending on the individual policy, this one-off period lasts either 60, 90 or 120 days, and is in place to stop people purchasing insurance policies and then claiming straight away.

In the event that you’re made redundant or told about a possible risk to your role before the IEP has passed, you’ll need to contact us immediately to cancel your cover, as any claim you make would not be valid.

If you’re purchasing an accident and sickness policy, it’s important to note that you won’t be able to claim for any pre-existing conditions, i.e. any condition or injury which you’ve suffered or sought treatment for in the last 12 months. However, if you can verify that you’ve been symptom free for at least 24 months, you should be able to claim.

Both unemployment and accident and sickness policies come with an excess period, lasting anything from 0-120 days.

When you buy a policy, you’ll be asked to choose an excess period (also known as a deferred period or waiting period), which just means the amount of time you’ll need to wait after you claim, before receiving your first payment.

As a rule, the shorter the excess period, the higher your monthly premium will be, so it’s important to think carefully about which one you choose.

Many of our customers opt for a 30 day excess, because they are confident that they can support themselves financially for the first month after making a claim.

If you think you need your benefit payments to start sooner, there is the option of a ‘back to day 1’ excess period, which will pay you in arrears from the very first day of your claim.

For more details about Income Protection Insurance, or to find the right policy for you, we highly recommend speaking to one of our advisors. As dedicated Income Protection specialists, they’ll be able to compare the most competitive quotes to find you the best cover at the best possible price.