What is income protection insurance?
Income protection is a type of insurance that provides an income for people who are unable to work due to illness or injury. When they are not able to go to work, the policy pays out part of their salary so that they can cover their expenses until they are able to return to work.
It differs from similar policies in that payments are not made as a one-off lump sum, but rather regularly until the payments are no longer needed.
Who is income protection insurance for?
Essentially, the insurance is designed to support people who would struggle to pay their bills in case
of an injury or illness. Income protection insurance covers most things that would leave you unable
to work, offering peace of mind that you’ll have an income even if you need to temporarily stop
What are the different types of income protection insurance?
There is more than one type of income protection policy available. There is short-term income protection, which is paid out over a set, limited period (usually until a maximum of two to five years) and is used as a temporary measure against reduced income. Long-term income protection insurance is, as the name suggests, a long-term policy that covers you until retirement. The cost of the policies and the amount of money they pay will differ, depending on the type of insurance cover you take out.
What affects the cost of the policy?
The cost of the policy will be calculated depending on your individual circumstances. The starting point will be your age, income, your lifestyle (for example, if you’ve ever smoked/how many units of alcohol you consume each week, and so on), and your health (including any present or past medical conditions that you or your family have or had). From there, it gets more policy specific. For example, the amount of your income that you want to have covered, the length of time you want to receive payments, and the ‘waiting period’ between your falling ill and when payments begin. While it will not replace a full income, income protection insurance is a useful service for people who would struggle to make ends meet in the event of being unable to work.