Why consider income protection?

Income protection is a type of insurance policy that is designed to pay out and supplement your income if you cannot work due to sickness, accident or injury. Income protection gives you the peace of mind that you will still continue to receive an income until you can work again. Income protection shouldn’t be confused with critical illness cover, which pays out a one-off lump sum if you are diagnosed with one of the ‘critical illnesses’ stated in an critical illness policy.

Are you thinking of taking out income protection to guarantee an income should you become Financial Advisor UK or injured? Speak to a financial advisor from Financial Advisor UK. We offer a national network of fully FCA-approved experts and can match you with the ideal person who can advise on your circumstances. Not only will you receive the best advice, you’ll also get the best deals on income protection.

Income protection replaces part or all of your monthly wage if you cannot work because of illness or injury, and covers most conditions. You can also take out income protection to protect yourself if you become disabled as a result of a medical condition or accident. Your policy pays out until you are able to work again, or until you retire, die, or the term of the policy expires. Income protection usually kicks in when you can no longer receive a form of support and company sick pay from your employer. The longer you wait until the policy starts paying out, the cheaper your monthly premiums will be. It is standard for you to be able to claim on your policy as many times as you like, although it is likely that the more you claim, the higher your premiums will be.

Do I need income protection?

When considering income protection, it is important to think about whether you and any dependents you have (such as a partner or children) would be able to pay the bills, afford the mortgage/rent or other living expenses if you couldn’t work. Income protection is especially popular with people who are self-employed and do not have sick pay as a back-up if they become Financial Advisor UK. Always double-check what your employer could offer you if you were off sick in the long-term.

You may not need income protection if your company or employer offers a generous sick pay scheme. If you also qualify for government benefits if you were unable to work, you may not need income protection. If you have enough money saved up to support yourself and your family if you couldn’t work, or your partner works and brings in enough income, these are other reasons not to take out a plan for income protection.

How much would income protection cost me?

Premiums that you pay every month for income protection will depend on the type of policy you take out. Income protection covers a wide range of illnesses, injuries and situations in which you cannot work. Always check the small print to ensure that you are properly covered for what you need. Costs for income protection will generally be based on your age, occupation, whether you are or have been a smoker in the past, your lifestyle, health, family medical history, the waiting period you’d like to wait for until your policy starts to pay out, and how much money you’d like to receive. Your premiums will also depend on the type of cover you take out – remember that any additional extras you take out with the policy provider will come at a cost.

Calculating the amounts of cover you need

To figure out how much income protection cover you require, calculate how much you need every month to pay your mortgage/rent, utilities, bills, debts, credit card payments and any loans. You’ll also need to consider other expenses such as food, petrol, childcare and other large costs such as car maintenance, etc. Get an overall figure for the amount you will need per month to cover these expenses.

Check what types of sick pay and benefits you are entitled to through your employer, as you may have a contract that offers a certain amount of company sick pay. You can do this by approaching your company’s HR director. If you are self-employed, this won’t apply. When you have a rough figure for how much you might receive per month in sick pay, deduct this from the figure you calculated in terms of your monthly expenses. If there is any shortfall, consider where this extra income will come from. If you don’t have the savings, it may be worth considering income protection.

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