An income protection policy will provide financial protection in the event you lose your job or become too ill or injured to work for a prolonged period of time.
What you’ll be covered for will depend on the type of policy you take out. Typically you’ll either take out short term or long term income protection.
Short term income protection
Short term income protection will typically cover you from 6 months to a year, or sometimes up to two years depending on the provider.
Typically, your policy will either pay out until you return to work or until the policy expires (whichever happens first).
You’ll have the option to choose from; accident and sickness only, unemployment only or accident, sickness and unemployment.
With accident and sickness only, you’ll receive a pay out if you become ill or injured and are unable to work as a result.
With unemployment only, you’ll receive a pay out due to being out of work (some policies may also pay out due to redundancy, but not all policies will cover this).
Accident, sickness and unemployment is the most comprehensive option as you’ll have the opportunity to receive a pay out if any of these circumstances happen to you.
Often, you’ll also be able to choose a policy which pays out a certain amount to cover specific bills (such as rent or mortgage payments) or you can choose a percentage of your salary.
Short term income protection is well suited to helping you cover rent payments or bills if you’re temporarily unable to work. For example, if you break your leg and it prevents you from carrying out your day to day tasks.
Long term income protection
Long term income protection works in a similar way to short term income protection but will provide more extended cover.
Unlike short term income protection, long term income protection won’t cover unemployment. Instead, you’ll be covered for sickness and accident only.
Your pay out will be a percentage of your annual salary, most commonly this 50 – 70% and you’ll receive it in monthly instalments.
You can have your policy pay out to you until you go back to work until you retire or until you pass away.
By taking out long term income protection, you have the option to be protected for the rest of your working life