Income Protection – when and why do I need it?

Income protection is a long term insurance policy which offers a payout if you are unable to work. It is arguably the one policy which every person in the UK should have, and yet is the one with one of the lowest sign ups and least talked about options.

Only a small amount of employers support their staff for more than a year if they’re off sick from work. Given the low level of state benefits available, everyone of working age should consider income protection (IP for short). Which? Magazine state that just 9% of the UK have some form of IP, compared with 41% who have life insurance and 16% who have private medical insurance (PMI).

When you take a policy out, there are two primary options that you can choose -a short term or long term policy. A short term policy will usually run for only a year or two from the date of the claim, whereas a long term policy may run for as long as it takes until you are ready to go back to work, or until you reach the age of retirement.

Many Short Term Income Protection policies do not need to cover a specific debt; they can simply be used to fund your lifestyle in the event that you lose your income. Long term Income Protection, however, will usually provide a regular income if you are unable to work due to illness or disability until you are well enough to return to work, or until the end of the policy term. Unlike most Short Term Income Protection policies it will generally not cover you if you are made unemployed or redundant.

Your health, whether you smoke and level of cover needed will weigh into your premium, but your type of job also plays a major part in determining what you’ll pay. Many insurers group jobs into four categories of risk, though some have more.

You can enquire into Income Protection whilst also getting quotes for your life insurance policy.

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