Income protection insurance is a policy that protects you against loss of income due to unemployment, illness or accident. It could provide you with a tax-free income and could continue to pay out until you are able to return back to work or retire.
When choosing your insurance policy (also known as ASU, or accident, sickness and unemployment insurance), there are 3 main cover options for you to choose from. They will determine how the policy works, and when it may pay out. You'll need to choose one from one of the types below or you may decide on a policy combining them:
- Illness - for cover against sickness and being unable to work
- Accident - protection against accidents leaving you unable to work
- Unemployment - losing your job
These insurance policies are designed to help you pay your bills if any of the above should happen, so that you can maintain your standard of living while you're not able to work. By paying a monthly premium, if any of those circumstances were to happen, your policy would kick in to allow you to cover your bills, such as your monthly mortgage or rent, loan/credit card repayments or utility bills.
- Accident insurance - if you tailor your policy for this, it'll cover you should you be unable to work after having an accident or prolonged illness. The policy could pay up to 70% of your monthly gross income and is designed to cover your main financial commitments like your mortgage or rent and household bills etc.
- Bill protection - this does exactly what it says on the tin - covers your monthly outgoings like loans, credit cards and household bills. This policy typically runs for 12 months and will start if you have an accident, a prolonged illness or become unemployed (as long as you've selected the right type of cover)
- Loan protection - if you're unable to work because of having an accident, having a prolonged illness or becoming unemployed, this policy could cover your loan repayments and other financial commitments
- Mortgage protection - much like the others, this policy comes into effect if you're unable to work due to an accident, sickness or unemployment. At that point, it could pay your mortgage repayments during your absence of work.
- Salary protection - this policy could replace up to 70% of your salary, if you are unable to work due to an illness, accident, or become involuntary unemployed.
- Sickness insurance - a sickness policy could provide you with short-term cover for up to 12 months, while alternatively, a long-term policy could cover you right up until retirement age, this could give you up to 70% of your salary, should you become sick long-term
- Unemployment protection - if you've become involuntarily redundant, this could give you up to 65% of your gross income each month, for up to 12 months or until you find another job. However, this wouldn't cover you if you've been let go for under-performing, dismissed, or if you decide to leave
There are two main different types of income protection policy, long-term and short-term. You can pick which you'd prefer during your quote, but what's the difference?
- Long-term - these policies can give you a tax free regular income until you're able to go back to work or you retire
- Short-term - typically, these policies will only pay out for up to 12 months rather than until you're fit to return to work, or retire (i.e. a long term policy)
Redundancies, injuries or debilitating illnesses can come out of nowhere. If any of these were to happen, you'd still need to pay your mortgage or rent and bills. Having the right type of insurance in place could help to cover those bills until you're ready to return to work*. While your policy is paying you a regular amount of money, depending on who your policy is with, you may still able to claim sick pay and any other benefits you're entitled to.
An income protection policy could help cover any of a number of typical, regular expenses in your life. You could still make your loan payments or repay credit card bills in your time of need. Simply tell us about your current circumstances using our online form and we'll fetch our best quotes for your needs.
*Depending on your policy, this could be limited to 12 months, or on a long term policy, until you retire.
As well as picking between long-term and short-term income protection policies, you can also tailor your quote to your needs, defining things like:
- How long you want the cover to pay for
- How much cover you want. Depending on who your policy is with, this could be as much as £15,000
- The circumstances you want to cover to protect your bills, lifestyle, income and mortgage
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