Beginner’s Guide to Income Protection

WHAT IS INCOME PROTECTION?

Income protection, commonly known as IP can provide monthly tax-free payments that replace part of your income. These payments help ease any financial hardship if you’re not able to work.

The cover usually pays out until you are able to start working again or until the end of the benefit or policy term. You can claim multiple times during the term of your policy.

You can also take out budget income protection which usually costs less but the payment period is limited for each claim.

WHY SHOULD YOU TAKE OUT INCOME PROTECTION?

In the UK nearly a million people find themselves unable to work because of serious illness or injury every year (ABI 2015).

If you become unable to work, would you cope by surviving on your savings, sick pay or on state support, which is currently as little as £57.90 a week? If not, it is likely you will require an alternative way to continue to pay your essential bills and it may be worthwhile considering income protection.

HOW MUCH DOES INCOME PROTECTION INSURANCE COST?

The cost of a policy will vary depending on various factors such as:

• Age – usually the older you are the more you will have to pay for income protection.
• Job – you may be asked to provide details on your job. If your job involves extra risks such as working at
• heights it is likely that you will have a higher premium.
• Occupation definition – if your policy covers your own occupation it means you will be covered if you have
• been declared medically unable to do your own job. If you want to pay a lower premium you could opt for any occupation which means you won’t be covered if you are still able to work in any job or suited occupation which means you will be covered if you can’t work in a job similar to yours.
• Smoker status – some providers will want to know your smoker status, if you are a smoker you may have to pay a higher premium.
• Health – if you are in good health, have a low BMI and no family history of health risks your premium should be more favourable. However, some providers don’t take health into consideration.
• Income to be covered – the higher your salary, the more income protection will cost you each month.
• Waiting period before the policy pays out – you generally set payments to start after your sick pay comes to
• an end. The longer the waiting period, the lower the monthly premiums.
• Range of illnesses and injuries covered – generally the more the policy covers, the greater the premium will be.

Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.

GET IN TOUCH

If you would like advice on taking out or reviewing your income protection policy then speak to Mark today by emailing him via mark@hhhmortgages.com or by calling on 01453 887179.