Income protection insurance

There are some specialist policies that protect you against the loss of income if you lose your job through redundancy or involuntary unemployment. Unfortunately, these policies are currently unavailable due to the coronavirus outbreak. Our guide on what income protection is will help answer any questions you have.

Yes, you can have Universal Credit and income protection insurance. However, there is an overlap as if you make a claim on your insurance policy and start receiving monthly payments, it lowers the amount of Universal Credit you’re entitled to. You can check on the Money Advice Service.

Yes, you can. When filling out the quote form you’ll see a question on ‘waiting time’ – this is the amount of time you must be unable to work before your monthly benefit will begin to be paid.

The longer you can wait before needing your payments the cheaper your policy could be.

Things to think about when working out your wait time are:

• If you can’t afford a day without pay
• If you could live solely off statuary sick pay (SSP) for the 28 week period before starting your income protection payments
• Whether you have any savings you would use for the first month or so
• If your company has any other sick pay benefits as well as SSP

Yes. If you’re paying the insurance premium yourself, then there’s no tax liability on any benefits you receive. If you have a mortgage or rent, or a commitment to household bills, then an income protection policy will pay you a guaranteed tax-free monthly amount to help you cover these expenses.

If you were to get sick and left unable to work, you would want something in place to help you and your family out. That’s where an income protection policy can help. By getting a policy that helps provide a regular income to cover your mortgage, household bills and other expenses, you can rest assured that you’re covered.

This depends on whether you choose a short or long-term policy, how much income you have in the first place, and how much money you need to cover your bills, mortgage and other essential outgoings if you’re unable to work due to illness or accident. Consider these as a starting point in determining how much cover you’re likely to need. You can also choose to have the policy increase each year so that the chosen benefit keeps in line with inflation.

Insurers typically cover up to 70% of your salary before tax. Some insurers will restrict the amount you can receive to a maximum, so you have an incentive to rehabilitate and return to work, and so you do not profit from your illness or misfortune.

Make sure you find out what benefits you’re entitled to if you’re unable to work. Check the exact details of what your employer has to pay you and for how long. If you benefit from an Employers Group Income Protection Scheme, check how long you will be paid for.