Income Protection Explained.

With income protection in place, you will receive a tax-free monthly amount If you unable to work for medical reasons; physical or mental, illness or injury. These monthly payments can help to cover your main outgoings until you are well enough to go back to work, whether you are employed or self-employed. Depending on your type of policy you can claim as many times as you need to during the term of your policy.

Do I need Income Protection?

Most working adults would benefit from income protection because, in most cases, if we lost our income our financial commitments would be affected. If your partner relies on your income or you have children that are dependent, then your loss of income would also have an impact on your family.

Income protection can be valuable in many cases:

• If you are the sole breadwinner
• If you are self-employed or employed
• If you couldn’t afford to pay the bills if you were unable to work
• If you are a homeowner
• Couples or single parents who have dependants
• If you are a renter with financial commitments

Having income protection in place provides you with the peace of mind that if you temporarily lost your income then you wouldn’t have to borrow money, rely on others, or drastically change your lifestyle.

How Income Protection Works

Taking out income protections means that you will pay a monthly premium based on the details of your policy. You decide how much you would like to receive if your health prevents you from working. This is generally based on your current income and insurers will set your monthly amount at a maximum of 50-60% of your pre-tax income.

Waiting Period:

All income protection policies have a waiting period, which is the period between when you are unable to work and when you receive your first payment. This can be anywhere between 1 and 52 weeks. You decide on this waiting period. It is important to note, you will pay lower premium for a longer waiting period than a shorter one. This decision may depend on your personal circumstances and whether you have the finances in place to meet your living costs without any replacement income.

Full-term and short-term cover

Full-term and short-term refers to the maximum amount of time you can claim your monthly payments for. Full-term allows you to claim for as long as you need while you are signed off from work. Once you are fit enough to return to work then your policy ends. With short-term cover you have a maximum amount of time you can receive payment for. This is a more affordable cover but full-time can provide you with a more security as we simply cannot foresee any future health conditions and their severity.

How much Does it Cost?

There are a variety of cover types with income protection as people’s budget and circumstances differ. So, your premium will depend on the type of policy you want. The insurer will also consider your lifestyle, your age and whether you smoke. We always suggest speaking to an independent advisor to gain a more accurate cost for income protection.

Comparing Different Types Of Cover

There are many types of insurance that can help protect your family. Life insurance and critical illness protection is also worth considering if you are researching income protection and types of cover.

Life insurance covers your family or chosen dependents with a lump sum payout when you die.  You make monthly payments to the insurer in case anything happens to you during the duration of the policy. If you do pass away during the term of your policy, then your insurer will pay a lump sum of money that you agreed on to your family. Your family can then use this lump sum to clear any debts, mortgage, childcare if necessary or day to day expenses.

Critical Illness Cover pays out a lump sum if you become critically ill with one of the serious illnesses the policy covers. This one-off tax-free payment can help cover a mortgage, rental payments, care for a loved one, make necessary alternations to your home or simply cover your household bills.

Talk to one of our advisors to discuss which policy is right for you.