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The main benefit of income protection is that it provides monthly payments to replace your income while you’re unable to work due to illness or injury.
A percentage of your usual earnings (often up to 70%) will be paid out to help you cover your daily living expenses.
While many UK workers benefit from sick pay, this is only paid for a set period and there are some workers that don’t receive this benefit at all (such as the self-employed).
Income protection can provide reassuring peace of mind that you and your loved ones are taken care of financially during your working life.
5 key benefits of income protection:
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Income protection is an insurance policy that covers your income if you’re unable to work due to illness or injury.
A percentage of your usual earnings will be paid, on a monthly basis, for a specified period to help you take care of your financial commitments.
When making a claim, you’ll need to wait for a specified period to pass before you’ll receive payments.
This is known as the deferred period. If you’re still unable to work after this time, payments will commence.
You’ll receive payments until you return to work, your cover expires or you retire. Whichever happens first.
Compare income protection quotes through Reassured Advice to find a great deal on your ideal policy.
Whether you need income protection will ultimately depend on your personal circumstances.
However, anyone earning an income could benefit from having this form of cover in place should the unexpected happen.
In recent years the number of people who are considered ‘economically inactive’ due to long term illness has risen to 2.5 million, highlighting the likelihood of falling ill during your working life
Do you have savings?
Do you have your own savings that you could fall back on or are you part of the 34% of UK residents with either no savings or less than £1,000 in savings?
Do you receive sick pay?
You may receive sick pay from your employer, however not everyone is entitled to the same benefits.
Does your employer offer a generous company sick pay scheme or do you receive statutory sick pay (£109.40 per week for up to 28 weeks)?
Are you self-employed?
If you’re self-employed you won’t benefit from sick pay and may need to rely on government support such as ESA (Employment and support Allowance).
How much you get will vary depending on certain factors but could be up to £84.80 per week or £129.50 per week if you’re unable to return to work.
By assessing your personal circumstances and available funds you can estimate what you’d need to take care of and how much you’d need to do so.
If you’d struggle to make ends meet, income protection could help to provide you with a much needed financial lifeline.
There are many benefits to securing income protection insurance. Below we have highlighted our top 5 benefits:
Receive regular monthly payments
If you needed to take an extended period off work due to long-term sickness or injury, you may worry about how you’d keep up with your financial commitments.
Without income protection in place, you’d have to rely on sick pay (if you receive this benefit), dip into your savings and/or borrow from family/friends.
However, with income protection in place, you can rest assured that you can still receive a percentage of your income while you’re off work.
Up to 70% of your usual income could be paid out in monthly (tax-free) payments.
You’ll receive these payments until you’re ready to return to work, for the duration of your payment period or until you retire.
Payments aren’t tied to a specific financial commitment
With some policy types such as mortgage payment protection insurance (MPPI) or payment protection insurance (PPI), the payments you receive are used to cover a specific financial commitment.
For example, with mortgage payment protection insurance, the payments typically go straight to your mortgage lender to cover this key expense - meaning you can’t use the funds for anything else.
However, with income protection, the payments are paid directly you, so you have the freedom to spend them on whatever you see fit.
This could help you to cover:
Whatever your usual monthly wage would go towards, income protection could help to cover it.
Provide your own sick pay
Not all workers are entitled to sick pay benefits from an employer, such as the 4.24 million self-employed workers in the UK.
While you may have access to ESA, would £84.80 (or £129.50 if you’re unable to return to work) per week be enough to help you cover your financial commitments and living costs?
By securing personal cover, you can be in charge of providing your own sick pay and you can choose the policy terms that best meet your needs.
This can provide you with peace of mind that you can still receive an income while you’re unable to work.
Alternatively, if you do receive sick pay, an income protection policy could help to ‘top up’ this benefit.
If you only receive statutory sick pay, you could use an income protection policy to provide an additional level of protection once your sick pay has come to an end.
Give yourself the recovery time you need
If you’re off work, and worrying about your finances, you may feel forced into going back to work before you’re truly ready as a way to minimise the loss of income.
But, with an income protection policy in place, your policy could pay out to you until you’ve made a full recovery.
In fact, when securing a long-term policy, you could still receive an income for the rest of your working life even if your incapacity meant you were unable to return to work.
Protection against a wide range of illnesses/injuries
Unlike other forms of cover, you don’t need to be diagnosed with a specific illness (which meets the insurers definition) to make a claim.
You can claim for any illness that prevents you from working so long as it meets the definition of incapacity listed in your policy.
Thankfully, most policies come with an ‘own occupation’ definition, which means you can claim for any condition which prevents you from doing your own job.
While we have presented you with the benefits of income protection, before securing a policy it’s important to weigh up both the pros and the cons to establish if cover is right for you.
Below we have listed the disadvantages of income protection:
It doesn’t protect your full income
An income protection policy won’t pay out your full income - it will pay out a percentage. This percentage can vary but, typically, most insurers offer to pay out between 50% - 70% of your usual earnings.
While this can help to keep you afloat, it may not cover all your financial commitments (depending on your personal circumstances).
It doesn’t cover unemployment or redundancy
You’ll be covered for illness and injury under an income protection policy. You won’t be able to claim for any form of unemployment, including involuntary redundancy.
If you’re looking for protection against unemployment, you may wish to consider another policy type.
Any pre-existing conditions could be excluded
If you have any medical conditions, you’ll need to disclose these during the application process. Depending on the type and severity of your condition, it could be excluded from your cover.
This means if you need to take time off as a result of your condition, you won’t be able to make a claim. Illnesses/injuries related to your condition may also be excluded.
When securing cover through a broker not only will you be provided with all the information you need to know, but you can also ask as many questions as you need to fully understand what your will policy cover.
Reassured Advice are dedicated to finding you the right policy for your needs at the best price.
Simply get in touch for your fee-free quotes and personalised recommendations.
Income protection benefits are generally tax-free.
This is because the premiums are paid for out of your own pocket, which is money that would have already been taxed by your employer or by self-assessment (if you’re self-employed).
You also don’t have to pay any national insurance contributions for your policy.
70% of your usual income is typically the maximum amount that can be paid out by an income protection policy.
However, many insurers also have a specified maximum benefit amount they will pay out per month/year.
Below is a list of some popular UK insurers and their maximum benefit amounts:
|Insurer||Maximum benefit amount|
|£20,833 per month|
|£20,000 per month|
|£20,000 per month|
|£10,000 per month|
|£4,750 per month|
As you can see from the table above, the maximum benefit amount can vary between insurers.
This highlights the importance of comparing multiple quotes to secure the policy that will pay out the highest amount of your income.
Comparing quotes through a broker, like Reassured Advice, means you’ll have a dedicated expert to do the hard work for you.
A friendly member of the team will find the best options to meet your needs and find you the cheapest quote.
Simply get in touch for your fee-free quotes.
One isn’t necessarily better than the other as each policy covers you for different circumstances.
An income protection policy provides cover during your working life and can pay out a percentage of your income if you’re unable to work.
Whereas life insurance can pay out a lump sum to your loved ones after your passing.
If its within your budget, you could secure both policies simultaneously to provide a comprehensive cover solution.
|Income protection||Life insurance|
|Pays out to you during your working life||Pays out to your loved ones after your passing|
|Payments are made monthly (to mimic your income)||A lump sum payment is made to your loved ones|
|Could help you to keep up with essential living costs while you’re off work||Could help loved ones to cover financial commitments and other key costs (such as your funeral)|
|Short-term & long-term options available||Term-based & whole of life options available|
|Maximum benefit up to 70% of your usual income||Maximum sum assured up to £1,000,000|
|Available from 20p-a-day through Reassured Advice ‡||Available from 20p-a-day through Reassured †|
Using the services of Reassured Advice you can compare both income protection and life insurance to find the right solution for your needs.
Why not read our in-depth income protection vs life insurance guide for more information? »
If you worry about what would happen to your income if you were unable to work, income protection insurance could be beneficial.
Ultimately, whether income protection is worth it for you will depend on your personal circumstances.
Income protection could be particularly beneficial for those who:
If you and/or your family rely on your income to pay for daily living costs and financial commitments income protection could help you to maintain your current standard of living.
Not only could you receive monthly payments when you need them most, but you can live with peace of mind that you’re taken care of no matter what happens.
Why not discuss your needs with a friendly expert at Reassured Advice?
Now you know the benefits of income protection, why not compare quotes to find your perfect policy?
It’s wise to compare a number of quotes to ensure you’re getting the best deal on a policy.
Reassured Advice can help you compare quotes from the whole of the market, allowing you to secure the right policy to meet your needs at the most affordable price.
You’ll also get personal recommendations on the best option for you from a dedicated expert.
Quotes start from just 20p-a-day, so why not get in touch?
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