Income protection, when work has to wait.

What is income protection, and might I need it?

Income protection replaces part of your monthly earnings if illness or injury leaves you unable to work. After an agreed waiting period, it pays a regular income to help cover the mortgage, household bills and everyday costs.

Most policies cover a percentage of your earnings rather than your full salary. The amount available depends on the insurer, your income and how it is assessed.

If you pay the premiums personally from taxed income, payments from a successful claim are normally tax-free. Employer or company-funded cover can be treated differently.

Income protection does not usually cover redundancy or unemployment. You would need separate cover for that.

It could be suitable if:

• You are self-employed and have no employer sick pay
• Your employer provides limited sick pay
• Your savings would not support you through a long absence
• Your household depends heavily on your income
• You have a mortgage or other commitments that would continue if you stopped working

When would payments begin?

The time between becoming unable to work and receiving your first payment is called the deferred period.

Before choosing one, check exactly what sick pay your employer provides and how long your savings could support you. Deferred periods commonly range from a few weeks to a year. The longer you wait, the lower the premium will generally be.

The aim is to arrange the policy so that it begins when your sick pay or savings run out, without leaving a gap you cannot afford.

How long would it pay?

This depends on the payment period you choose.

• Short-term cover commonly pays for one, two or five years per claim.
• Full-term cover can continue until you recover, return to work or reach the end of the policy term, provided you continue to meet the claim conditions.

A short payment period can make the policy cheaper, but it is not the same protection. The difference matters if you are still unable to work when those payments end.

The claim definition matters.

Not every policy uses the same test to decide whether you are unable to work.

• Own occupation assesses whether you can carry out the essential duties of your usual occupation.
• Suited occupation may require you to be unable to do another job suited to your experience, education or training.
• Work tasks assesses whether you can complete a list of everyday work-related activities.

These definitions can make an enormous difference at the point of claim. We compare the wording as well as the monthly premium.

Things worth thinking about.

• How much would you genuinely need each month?
• When would your employer’s sick pay end?
• How long could your savings support you?
• Would you want payments for a fixed period or until retirement?
• Should the cover increase over time to help keep pace with rising costs?

Everyone’s circumstances are different. We will build the cover around your income, occupation, existing benefits and budget, then explain exactly what it would and would not cover.