Income protection plans provide regular income for a fixed period if you are unable to work due to an accident, illness or redundancy. Research suggests that 10% of the working population has income protection insurance, of the remaining 90%, most are unsure where an alternative income might come from.
We offer comprehensive advice on income protection insurance and as independent income protection advisers, we can search the whole insurance market to find the products that best meet your needs at the most competitive premiums.
Some people think their savings are adequate to tide them over any period spent without pay from work. Average savings are currently at an all-time low and are unlikely to last for any significant duration. Some employers might offer a reasonable sick-pay scheme for those temporarily incapacitated for work, but even these payments will be withdrawn if the absence is longer than three to six months and no pay at all will be available in the event of redundancy.
We can help you understand the level of income cover you might already have in place and assist you in covering yourself for any future needs.
The amount you pay for an income protection policy will usually be influenced by the type of job that you do. The higher the risk of injury or stress the more the premium will be. There are usually 4 categories of classification. Below is an example of a few job titles with their likely classification, please note that some insurers may categorise the same jobs differently.
Class 1 (lowest risk): managers, administrative staff, professionals, secretary, computer programmer
Class 2: engineer, shop assistant, florist, driving with mileage exceeding 20,000 miles per year
Class 3: plumber, teacher, care worker
Class 4 (highest risk): mechanic, bar worker, construction worker, roofer
There are generally two forms of income protection:
Accident, Sickness and Unemployment (ASU) – this is usually a policy which pays a benefit for a short period of time such as 1 or 2 years. There is usually an exclusion period from inception and you can choose whether you want both accident and sickness as well as unemployment combined or whether you want accident and sickness only or unemployment only. During a recession, it is often difficult to get unemployment cover unless you are changing your mortgage or taking out a new mortgage. Due to the Covid-19 pandemic ASU cover is not available at this present time.
Permanent Health Insurance (PHI) – this is a policy that pays a benefit for a longer period of time, normally until the end of a selected term at outset or until you return to work or until you retire or die. PHI is usually underwritten more strictly than life insurance because of the greater cost of being ill than of dying. The different types of policy are far ranging and care needs to be taken that you understand the different benefits between policies and providers. For example, some insurers will cover only 50% of the last 12 months earnings whereas others may cover 66%. Changing job categories may cause a premium increase or, in certain instances, a decline of cover even where guaranteed premiums have been taken at outset.
The state provides statutory sick pay and employment and support allowance, but is this enough? Have a think about how much your monthly outgoings come to and then see how much the state would give you. You might find there is quite a shortfall. How would you bridge the gap?
The state may help a little, this is what you may get each week:
Statutory sick pay from 1-28 weeks: £79.15, or
Employment & support allowance (assessment phase) from 1-3 weeks: £64.30, or
Employment & support allowance (main phase – work related activity group) from week 14: £89.80, or
Employment & support allowance (main phase – support group) from week 14: £95.15