Income protection for dummies
The ultimate dummies guide to income protection insurance.
Premiums, benefits, deferred periods. What do they all have in common? Yes, they’re all words. But more importantly? They all refer to income protection insurance, a type of insurance that can cover up to 60% of your monthly income if you suddenly can’t work due to illness or injury.
This is the ultimate guide to income protection insurance for dummies, from the insurance experts (that’s us just so you know).
The basics
As Homer Simpson once said, “Money can be exchanged for goods and services”. In the world of insurance, this is also true. The way income protection works is: you pay a monthly amount to your insurance provider, called a premium, and in return the insurance provider will pay you up to 60% of your monthly wage if you can’t work due to illness or injury.
What’s the difference between income protection insurance and life insurance?
So, what is income protection and is it right for you? Simply put, income protection is insurance that pays out a tax-free sum every month if you become injured or ill and can’t do your job. Life insurance pays out if you pass away or become terminally ill.
What does income protection insurance cover?
Many illnesses that would leave you unable to work are typically covered, such as broken bones, mental health conditions and serious illnesses like cancer.
What can the payout be used for?
The payout can be used for anything but is typically used on things like rent or mortgage payments, car payments, household bills like electricity and gas. It can be used to pay those big bills without having to change your lifestyle or dip into savings.
How much is income protection insurance?
It can vary based on a lot of different factors like your age, job, current health, family history, your lifestyle, how long you want the payments to last and the gap you want between making a claim and getting the payout. The younger you are, the lower the price will be, so it’s best to lock in a cheaper rate while you’re young.
How much could you get each month?
Typically, up to 60% of your pre-tax monthly wage can be covered. This means your policy will be tailored to your wage and will be unique to you.
How long does the policy last?
The policy typically can cover you until you reach the state retirement age.
What's a deferred period?
The deferred period is the gap between making a claim and the money hitting your bank account. Deferred periods are flexible and can range from weeks to months. Increasing the deferred period can help lower monthly premiums too. The deferred period can be customised to when your sick pay ends.
Do I get a payout at the end of my income protection policy if I don’t claim?
You don’t get your money back if you finish your policy and don’t make a claim.
However, that doesn’t mean you can’t enjoy the perks of your policy alongside the peace of mind. Many income protection providers have many extras that are available to you while you have your policy in place. We’ll get onto these in more detail later.
How long does the policy last?
To qualify you must be employed and many insurance providers require you to work more than 16 hours a week.
Will my income protection change with my salary?
Yes, you will need to review your policy if your salary increases or decreases. We have a dedicated review team at IGotCover, who can help you review your cover, as and when you need to.
Do I need short term or long-term income protection?
Short term income protection usually covers a maximum claims period of up to 2 years and is a more affordable option. You would have to return to working for at least 6 months to make further claims in the future.
Taking out a long-term policy will cover you for a longer period and with some policies you can claim more than once. That means if you’re ill, then recover but fall ill again, you could still claim.
How to get the best income protection insurance for me?
Making sure you get the right income protection policy might seem daunting but there is one surefire way to make sure you get the best insurance for your needs, at the right price.
And that’s going to a trusted broker, (what would you know, we’re one of those), we can help you get personalised quotes that suit your needs and lifestyle and at a great price.
What other perks are there?
Income protection insurance comes with loads of benefits that can help you right now, while you claim and after you claim, supporting you throughout your policy lifetime and beyond. Different providers offer different benefits and perks.
Some of these policy perks, depending on the provider, can include:
- Health and wellbeing support
- Annual health check
- Second opinion service
- Bereavement support
- Remote access to a GP
- Rehabilitation support, to help ease you back to work
- Discounted gym memberships, discounted coffees and more
- Fracture cover
These benefits aren’t just only for you, they can often be used by your partner and children too.
To sum it up
Let’s be real – life has a funny way of throwing curveballs when you least expect it. And while we can’t help you dodge them (we’re insurance experts, not magicians), we can help you soften the financial blow. That’s where income protection comes in.
Bottom line? If your income is important to you (spoiler: it is), income protection could be a smart move. And if you want to make sure you get it right? That’s what we’re here for.
