Income Protection Insurance

What Is Income Protection Insurance?

Income protection insurance is a policy designed to protect your income if you’re unable to work due to illness, injury, or disability. It provides a regular, tax-free income to help you cover your living costs until you can return to work or retire.

This type of insurance offers peace of mind and financial security. It’s especially valuable if you rely on your income to pay for essentials like rent, mortgage payments, or bills. Let’s explore how it works and how it can help.

How Does Income Protection Work?

Income protection policy works by replacing a portion of your salary when you can’t work because of health issues. 

Here’s how it typically functions:

1. Choose a Policy

• Decide how much of your income you want to protect (usually up to 60-70%).
• Select a waiting period (the time before payments start), which could be weeks or months.

2. Pay Premiums

• You pay regular premiums based on factors like your age, occupation, and the level of cover.

3. Receive Payments

• If you’re unable to work due to illness or injury, the policy pays out a monthly income. Payments continue until you recover, reach retirement age, or the policy term ends.

How Will Income Protection Insurance Help You?

Income protection provides financial stability when you’re unable to work. Most people rely on their income to support their lifestyle. But what happens if illness or injury stops you from working? Statutory Sick Pay is limited to £109.40 per week (as of 2023), and it only lasts for 28 weeks. For many, this isn’t enough to cover basic expenses.

Your income protection policy bridges the gap. It’s particularly important if:

• You’re self-employed or don’t receive sick pay from an employer.

• You have dependents who rely on your income.

• You have significant financial commitments, like a mortgage.

Income protection insurance is a lifeline when life doesn’t go as planned. It provides financial support, allowing you to focus on recovery instead of worrying about bills.