Do You Need Income Protection?

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What is income protection?

There are a lot of insurance products. In fact, the more you dig deep into what is available, the more you uncover. For many people, income protection insurance is one of those obscure little insurance products that you never believed existed and once you look into it, you are going to wonder how on earth you lived without it!

What is income protection? It’s insurance that pays you a salary just like your normal one when you are too sick to work.

Isn’t that just sick pay?

Sort of.

Statutory Sick Pay (SSP), the government-backed scheme and only sick pay level that your employer has to cover you for, is a little less than £100 a week. Accurate figures put it at £92.05 a week. That’s it - there’s no other associated boost, just that ninety-two quid. Your mortgage or your rent only needs to be four hundred pounds or more for it to be all gone.

And that’s it. Contrary to belief, there’s no other legal requirement for your company to pay you when you are sick. Also, SSP only lasts 28 weeks – after that, you are on your own. Great if you have a long-term illness that has had you signed off work for six months or more.

How does income insurance work?

With income protection (IP), you pay a monthly premium for cover that will look after you for years should you fall ill. It pays you a tax-free amount equal to 65% of your base salary, and it doesn’t ask too many questions.

Is 65% the best income protection insurance? It doesn’t seem that much.

It’s a little lower than you’ve been used to, but not by much. You don’t pay tax on income protection, so that 65% is a lot closer to 90% net once you’ve calculated it all through.

And you can keep claiming that SSP amount too – at least, while it is still valid.

Can I get income protection as a self-employed person?

While most mortgage-type products are impossible to get for someone who is self-employed, income protection has no such criteria. As an insurance product, it is not a type of debt but a monthly premium that you pay – if something happens to mean you cannot pay it, then they simply close the insurance.

You will have to provide proof of income in order for the insurance provider to properly assess the level of cover needed, but that’s not a credit check - it’s merely making sure you get the right level of insurance to suit you.

What are the benefits of income protection?

• Payout of 65% of your salary, tax-free.
• Available for the self-employed.
• Doesn’t affect SSP.
• Ability to set offsets to lower premiums and tailor the insurance to fit your life.
• Available on both short-term and long-term income protection contracts.
• Can be bought in conjunction with critical illness cover, life insurance and other products without issue.

How much does it cost for income protection?

How much do you earn? As the two figures are tied closely together, it is impossible to estimate one without the other. Other factors can have an effect as well, as with all life insurance products, including your age and health.

For an accurate value, please contact us today – either use our short contact form or give us a call. We’ll be happy to help!