Who can benefit from taking out Income Protection cover?
Anyone who does not get paid by their employer indefinitely when they are off sick from work should consider an Income Protection policy. Most people would not be able to maintain their standard of living if they had to rely on benefits from Statutory Sick Pay and Employment and Support Allowance (ESA) so Income Protection could form a key part of their financial protection needs.
The need for Income Protection Insurance is not merely limited to those people who are employed. Self-employed people for instance if off work due to illness or injury would not receive the sick pay provision that is often provided by an employer. So in actual fact it could be argued that the need for Income Protection is greater for self-employed people.
Anyone between the ages of usually 16 and 59 can apply for Income Protection cover. As the criteria for state provision of Employment and Support Allowance (ESA) becomes more stringent, it is key that individuals consider this type of cover to maintain their standard of living should long term illness or injury occur.
So long as each claim is legitimate an Income Protection policy can pay out a number of times and the insurer cannot cancel the policy as long as premiums are maintained. Depending on the premium that you’re prepared to pay, the monthly benefit payments can be linked to the Retail Prices Index (RPI). This means that they automatically keep pace with the official cost of living, a process known as ‘inflation proofing’.
What about my occupation and the premiums for an Income Protection Plan?
The likelihood of accident or illness varies depending on what occupation you do and premiums will vary to reflect this. For example, a roofer may pay a higher premium than an office clerk due to the higher risk nature of the job. However there are specialist providers who do not charge you more for having a higher risk occupation, though commonly the benefits are lower and/or would stop or be reduced when you are able to undertake any work, rather than being able to resume your original occupation. Always read the policy documents carefully to understand the terms of the policy.
What are Deferred Periods?
A deferred period could also be called a waiting period. It is the period of time that you need to be off work due to illness or accident before your Income Protection Policy begins to pay out. This time period is selected by each individual and is normally dictated by the sickness benefits that your employer provides. Thus if you are Self Employed or receive no sickness benefits from your employer, then you will usually require a very short deferment period. Deferment periods can range between 1 day and anything up to 24 months dependent on an individual’s circumstances, it is important to bear in mind that the shorter the deferment period the more effect it will have on increasing premiums.
What affects the premium I pay?
There a number of things which can affect the premium you may pay these are such things as:-
Age, health, occupation, deferment period, benefit required and indexation.
Income protection (with no investment link) has no cash in value at any time and will cease at the end of the term. If you stop paying premiums your cover may end.
Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against the loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk
This article (What is Income Protection Insurance?) is intended to provide a general appreciation of the topic and it is not advice.
At JPN Mortgage Solutions we are here to help you every step of the way from the excitement of the initial mortgage search, through to the joy securing an Offer and the precious peace of mind of knowing that, whatever life throws at you, your family are protected against any threat of losing their home.
The cost of insurance, particularly life insurance has fallen over recent years, whilst the quality of cover has in many cases increased. With this in mind, it makes sense to periodically review your cover with the help of a professional financial adviser. This section provides helpful information on the different types of protection product available.
As well as personal plans, we can also help business owners set up policies such as Key Person Insurance or Relevant Life Protection. These not only protect the company but can also provide tax savings with the premiums being claimed as a company expense.