Income Protection – Completing the Insurance Package

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When the majority of people think of life insurance, they focus on the most basic idea possible – an insurance policy that pays out a lump sum when you die. In essence, they think of whole of life cover – and probably one that pays out a million!

In truth, there is a range of life insurance products that come together to provide an impressive financial security blanket that protects you, your loved ones and your dependants from financial hardship throughout your working life, into retirement and beyond.

Life insurance changes as you do, adapting and moulding to fit the different stages of your life. When you need more money to provide for a full family, the policies are larger, but if you are retired or at a later stage in life and just concerned with making sure other people aren’t left out of pocket when you die, it can be quite small.

Without a doubt, however, the most important time for solid financial protection comes when you are the breadwinner (or one of them) – bringing in the pennies that pay for, well, everything!

Is income protection necessary?

Income protection is one of the many life insurance packages that is overlooked by the majority of working people in the UK today, yet it may very well be the most important one!

While getting life insurance to cover the cost of a mortgage is very important (read our guides on level term and decreasing term life insurance cover for more information), the reality is that you are far more likely to find yourself temporarily unable to work than you are to suddenly die!

And that’s a good thing.

There’s a lot of information on life insurance to help your family in the case of your death. There’s a growing understanding regarding critical illness cover (CIC) – making sure you can afford to live if you are made permanently unable to work due to an illness or injury, and here at Quick Quote Protect, we recommend getting both life insurance and CIC packages.

But what about just a non-life-threatening recoverable problem? You’ll be fine in six months, maybe nine, maybe twelve.

Who is paying the bills for the next twelve months while you recover?

If you don’t have income protection, then it’s likely that no-one is!

When is income protection insurance worth it?

There are schemes in place. Almost every working adult has heard of Statutory Sick Pay (SSP), even if they don’t really know what it is, and you go to work week after week just assuming your work have to pay you some sort of sick pay when you get ill.

But they don’t!

SSP, the scheme set up by the government, pays a little less than a hundred pounds a week to you if you become sick. One hundred pounds! Can you pay the mortgage or rent, cover the food, make sure all the bills go out on one hundred pounds a week?

Or do you need as much of your salary as possible?

Income protection insurance is worth it as soon as your salary is greater than the amount offered by SSP, and unless you are working for less than 16 hours a week earning less than the minimum wage, that’s almost every working person in the country!

SSP will simply stop helping you out after 28 weeks – that’s a little more than half a year – not nearly long enough to recover from many serious issues.

Isn’t it worth getting critical illness cover instead?

Income protection forms part of the entire life insurance package – so rather than saying ‘instead’, we’re saying ‘in addition to’.

Critical illness cover (CIC) is an important part of life insurance, making sure you get a lump sum if you are suffering something which is likely to permanently end your working life. It’s not a replacement for income protection (which assumes you will return to work once you are recovered).

Just as CIC isn’t a replacement for level term life insurance, so income protection isn’t a replacement for CIC.

How long does income protection pay out for?

The specifics of income protection depend a lot on the policy you set up. The term it covers you for, the length of the deferred period (waiting period) and ultimately how much it costs for income protection are all set by you.

In reality though – income protection pays out as long as it is needed. Unlike SSP with its defined 28-week limitation, income protection is a personal service to you that you have paid for and is scalable by you.

It’s not going to let you down.

What does deferred period mean?

You can save a great deal on your premiums by setting your income protection to start only after a delay between you first getting ill and needing the financial cover. If you have a work sick-pay scheme or other income that will cover you through the first few weeks of being sick, then it is worth including a deferred period before the cover kicks in. This will mean, however, that you cannot make a claim during that first period of being sick.

If you need it though, you can set your income protection policy to have no deferred period whatsoever.

How much cover do you need?

Only you know the amount of financial assistance you are going to need to rely on to support yourself and your family if you are unable to work. Like determining the length of any income protection term, the value of the policy is yours to define.

Income protection pays 65% of your salary, however, it is exempt from tax and so the actual amount to enter your bank account is a lot closer to your full salary than the 65% value might suggest.

For more information on the specifics of income protection payments, please read our other articles on the subject.

Who can get income protection?

At Quick Quote Protect, we work with a range of top UK insurance providers to make sure we can find the right policy for you. When it comes to income protection, that means we have the widest possible selection for everyone, including income protection insurance for the self-employed, short-term income protection insurance suitable for casual workers and, of course, long-term income protection insurance.

Simply put – if you are currently working and have an income, then we can set up a policy for you. Unfortunately, if you are currently out of work then we may be unable to start cover at this time.

Does income protection affect benefits?

Income protection doesn’t prevent you from receiving statutory sick pay or other related benefits and will not affect any tax credits or child benefit payments that you were receiving while working.

However, it may be considered income from the point of view of other benefit agencies such as housing benefits which may affect the level of any claim with them.

Income protection with Quick Quote Protect

Simply completing your life insurance portfolio is not the main reason to get income protection insurance – making sure your family is always looked after, is.

With a full range of life insurance products that can be tailored to fit your particular lifestyle and situation, Quick Quote Protect can get you the kind of financial security you have only dreamed of. Give us a call today or fill in our contact form to have someone call you back.