Income Protection
Income protection, for when work has to wait.
Income protection pays you a regular tax-free monthly income if you are unable to work due to illness or injury, after a chosen waiting period. It is arguably the most important protection product most working people have never heard of.
- Pays a monthly income. Tax-free benefit while you are unable to work, until you can return or the policy ends.
- Up to a percentage of earnings. Typically up to around 60 to 70 percent of your gross income, depending on insurer.
- You choose the waiting period. Common waiting periods range from 4 weeks to 12 months. Longer waits cost less.
- Can pay out more than once. Most policies can pay multiple claims throughout the term, subject to the policy terms.
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FAQ
Income protection questions
A clear, plain-English guide to a product that is often misunderstood.
How is income protection different from critical illness cover?
Critical illness cover pays a single tax-free lump sum on diagnosis of a specific condition listed in the policy. Income protection pays a regular monthly income if you cannot work due to illness or injury, regardless of the specific diagnosis. They serve different purposes and many people benefit from having both.
How much will it pay?
Most insurers will cover up to around 60 to 70 percent of your gross earnings, less any continuing income such as state benefits or sick pay. The exact figure depends on the insurer and your circumstances. The benefit is typically paid tax-free.
What is a waiting (deferred) period?
This is the time between being unable to work and the policy starting to pay. Common options are 4, 8, 13, 26 or 52 weeks. A longer waiting period reduces the premium but means you need other resources, such as employer sick pay or savings, to bridge the gap.
Will my employer's sick pay be enough?
Statutory sick pay is currently a low weekly figure paid for up to 28 weeks. Many employers offer more, but contractual sick pay typically lasts months, not years. Income protection is designed to take over once your other income runs out and continue for as long as you cannot work, up to the end of the policy.
Will it pay out for any illness or injury?
Policies use a definition of incapacity that determines when a claim will pay. Stronger 'own occupation' definitions pay if you cannot do your specific job, while weaker definitions only pay if you cannot do any job at all. We always recommend own occupation cover where it is available, as it offers the strongest protection.
What happens to my premiums if I claim?
Most modern policies waive premiums while a valid claim is being paid. Once you are back at work, premiums resume. Cover continues until the agreed end date, and you can usually claim again for a separate condition in future, subject to the policy terms.
Can the self-employed get income protection?
Yes, and it is often even more important when there is no employer sick pay safety net. Insurers typically use net profit (sole traders) or salary plus dividends (limited company directors) when calculating cover. We help you structure cover that reflects how you actually earn.
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Ves Doctorov Cert SMP
Owner & Principal Mortgage Adviser