If you have a family or loved ones to take care of, you should be prepared for anything that may come your way. You could have a family, perhaps with children, who rely on your monthly pay cheque. You could be the sole provider for your home, and your income is crucial to keeping bills covered and food on the table. With that in mind, would you have a back-up plan if you were to be out of work for a significant amount of time?
If you were to become ill or injured and unable to work, you may end up losing a lot of money for each week and month you are away from your job. That’s where income protection insurance can come in.
What is income protection insurance?
Income protection insurance can help you financially if you are unable to work. Whether you are made redundant, unemployed, or need to take leave due to ill heath or an injury, income protection insurance could keep you covered.
You pay a premium each month, that is calculated according to your age and employment type.
Usually an income protection policy will give you a financial hand-out until you return to work, or until retirement or death. However, you can opt for a short term policy that will cover you for a fixed amount of time.
How could income protection insurance help my family?
If you are out of work, you could feel the pressure with less income to pay for everything from debt, to food, to household bills.
Many companies find it too difficult to financially support their staff who are away from work with sickness or an injury. This means if you are unable to work for a significant amount of time due to an illness, you could end up with no wage to fall back on. This could affect your family and loved ones if a secure, steady income is no longer coming in. You can choose to get income protection insurance to cover a portion of your wage so that you can ease the pressure on your family and still provide for your dependants. If you have any debt payments that you mustn’t miss, you can choose to cover these.
Even if you are self-employed, you are able to have income protection insurance. This could be particularly beneficial for you as without an employer you do not have access to any sick pay.
Which type of income protection insurance is right for me?
There are two main types of income protection insurance to consider. These are short tern and long term income protection policies.
Long term income protection insurance
Long term protection often only covers you if you are away from work due to sickness or an injury. Long term protection will give you monthly payments until you are able to go back to work, or until your policy ends. This type of policy will usually not provide coverage if you are made redundant or become unemployed through measures other than sickness or injury.
Short term income protection insurance
Short term protection insurance usually provides coverage for between six and 12 months. It is the more affordable option as it only a temporary policy. This is not a permanent solution to unemployment, but can keep you covered financially for a fixed period of time.
Depending on your policy, you may be able to choose to go back to work when a specific job comes by, allowing you to have more time to apply for the perfect role while still receiving payments from your insurance. When picking your policy, you can choose between a selection of classes. The three classes are ‘own occupation’, ‘suited occupation’ and ‘any occupation’.
‘Own occupation’ is the most sought-after and therefore more expensive option. With this type of policy you can stay financially covered until you find the perfect job. This is particularly helpful if you have specific skills or have worked your way up to a high role in previous positions. This type of policy allows you to be picky about your next steps, so you can focus on getting back into the right job, while receiving monthly payments to keep your family protected.
‘Suited occupation’ is geared towards people who have very specific skills and would only like to return to a job suited to their employment experience and expertise. This means you may not have an exact job in mind, but there is only one specific area of employment that you would consider.
Finally, ‘any occupation’ policies would keep you covered until you find any job. This is the most affordable option of the three, and would be good for people who don’t mind which line of work they would return to.
How much does income protection insurance cost?
Every policy is different, and how much you end up paying each month depends on your personal situation, age, health and job.
If you work in a job that is deemed to have higher risk of injuries, you could end up paying a lot more per month than a position that is considered safer. So construction workers and jobs that require heavy lifting and manual work would generally be seen as more dangerous and more likely to lead to injuries. But someone working in an office as an administration assistant or as a sales assistant in a book shop could potentially be paying a much lower premium as these jobs don’t come with as many risks to your health and safety.
How much money could income protection insurance give me?
The maximum you could expect to receive is 70% of your monthly wage before tax. However, this depends on your premium. As an added plus, you don’t pay tax on any payments you receive.
How can I get income protection insurance?
There are many companies offering competitive policies out there, so it’s wise to consider all your options before making a commitment. By using our comparison tool, you can see a comprehensive list of all of the trusted insurance providers. You can take your time browsing and weighing up your options before you make a commitment. By looking at all your options you can find the perfect policy that would fit your budget, your employment type, and keep your dependants safe and secure no matter what.