Income protection insurance (also known as permanent health insurance) is a long-term insurance policy designed to support you financially if you need to take time away from work because of an injury or illness.
Not only is it useful for those people who don’t receive sickness benefits from their employer, but it is also a lifesaver for those who are self-employed. The insurer will continue to pay out until you are ready to return to work or until you retire or die. Payments will also stop at the end of the policy term.
Do you need income protection insurance?
According to the ABI (Association of British Insurers), one million workers a year find themselves unable to work due to a serious illness or injury. The chances of you falling prey to an accident or an illness, therefore, could be deemed as high. This is especially true if you work within a high-risk industry, where health and safety issues are commonplace.
So, consider your personal situation, and ask yourself: “Could I pay the bills if I had to take time away from work?” Especially if you don’t have sick pay or any other insurance policy to cover you, then you might consider income protection insurance necessary.
On the other hand, if you have savings in place to support yourself, an employer who offers a benefits package covering an income of 12 months or more, or a partner bringing in enough of an income to pay your monthly outgoings, then you might decide against taking out income protection insurance. You might also decide against coverage if you’re close to retirement, and you have a pension in place to help you live comfortably.
How much does income protection insurance cost?
Income protection insurance can cost as little as £10 per month, but it can be higher depending on how much coverage you need. And if you already suffer from pre-existing health conditions, work within a high-risk industry, or live a lifestyle that could be deemed as high-risk (if you smoke or practice extreme sports, for example), then you can expect to pay more on your premium each month.
You can reduce the costs, of course. In general, income protection insurance will cover up to 70% of your gross annual salary, but if you cover a smaller figure, e.g. 50%, then you will have less to pay each month. You can also reduce the costs by not paying for coverage you don’t need, so use an online calculator to help you work out what you need your insurer to cover.
To lower your monthly premiums, you might want to set a waiting period before the payments begin. So, if you do get sick pay from an employer, or if you have other insurance policies in place to cover you during your time off work, (such as the one-off payment provided by critical illness insurance), you might want to start coverage from income protection insurance after those payments have ceased.
For further advice on income protection insurance, please get in touch with us and we’ll help you find the most suitable policy.