Income Protection Guide For 2021
After a turbulent 24 months causing national financial instability for everyone. Many people have been asking similar questions about the future. What will be the financial impact of not being able to work? Without a monthly salary, can I pay the bills and maintain a lifestyle for my Family and loved ones? How do I Compare Affordable Income Protection policies available?
In todays detailed guide for 2021 we explore the importance of affordable Income Protection Insurance. Including how it can provide not just replacement earnings but also instant peace of mind.
What Is Income Protection Insurance?
Income Protection Insurance will make a claim payments to you to replace your salary should you be unable to work. For this level of financial security, a policyholder pays the insurer a monthly premium throughout the length of the Income Protection policy. Depending on your individual circumstance a policy can be set up on either a short term or long-term basis to match your individual needs.
How Can I Compare Income Protection Insurance Quotes?
By using an FCA regulated broker, like Protect Income Insurance to search and compare quotes for protection policies. Will allow you to do a single simple search and comparison of all of the UK providers including the top UK providers of Income Protection Insurance.
Some of the UK’s best providers of Income Protection have very different levels of cover. It is important to Compare Income Insurance policies to ensure that you have the best level of protection for you and your loved ones. Some of the UK leading providers of protection polices include:
Starting as Scottish Equitable, and then becoming part of Aegon in 1998, Aegon UK has over 3 million customers in the UK. As well as a full range of Insurance protection products including life cover and critical illness cover, they also offer retirement and savings plans.
Aegon has a minimum deferred period of 4 weeks and a maximum of 52 weeks
AIG Life provides life insurance and associated products in the UK. It is part of the American International Group (AIG) a leading international product provider operating in over 80 countries worldwide.
The minimum length of the deferred period is one month (4 weeks) with AIG and the maximum 52 weeks
There are two policy lengths, a short-term policy with a limited payment term of up to 2 years and a full payment term policy covering until you can return to work
As the UK’s largest insurer in number of customers, with over 15 million. Aviva today is the result of a merger between Norwich Union and CGU.
The minimum deferred period through Aviva is four consecutive weeks, and the maximum is 104 weeks
Policy pay-out lengths are up to 2 years for short term cover or full-term cover paying out for the whole time that you cannot work
British Friendly are Income Protection specialists offering a range of affordable products and features. Their three main offerings are Long Term Protect, Short Term Protect and Breathing Space.
You choose how quickly you want to receive a replacement salary once you make a claim. Options are from day one to 1 year
The choice of claim periods available are 1, 2 and 5 years under their short term protect scheme or full-term cover under the long-term protection plan
A specialist provider of income protection products in the UK, Cirencester Friendly offers a few different options including its flagship product, Income Protection Assured.
Benefits can start from just one week up to 52 weeks once a claim takes place
Coverage is available up to 70 years old under the Cirencester Friendly’s Income Assured Enhanced plan
Legal and General
With headquarters in London and operating since 1836, Legal and General are the UK’s most extensive product provider of life insurance products. Some consider them to offer the best life insurance cover in the UK.
Legal and General has a shorter minimum start period than most providers at just two weeks. The maximum claim start period is 52 weeks
The policy pay-out duration can be 12 or 24 months for their lower cost option or a standard full-term cover until you can return to the workforce
LV has over a million customers holding policies, including income protection and life insurance products. Founded over 175 years ago, they employ 1,700 staff in the UK to service customers.
The minimum period for pay-out is four weeks after a claim occurs and the maximum is 52 weeks
LV offers two policy options. Short-term cover which will pay you for a maximum of 12 or 24 months and a standard full-term option
Nationwide is the largest building society globally. It offers insurance products to its existing customers, also called members. Its life insurance offering also includes mortgage life insurance and income protection benefit.
Four deferred periods are available with Nationwide. These are 4, 13, 26 and 52 weeks
You can make a further claim for the same or related disability within 12 months of returning to work
Currently, Royal London has 8.8 million live policies and 4000 employees. As a mutual insurer with no shareholders to pay, Royal London prides itself on providing its policyholders with better value and high levels of customer service.
The period before pay-out begins ranges from 4 weeks to 52 weeks
The length of short-term payment cover is higher than other providers with up to 5 year’s salary cover available
Shepherds Friendly is one of the world’s oldest mutual societies, founded almost 200 years ago. Income protection is one of the products that the mutual was built on.
The waiting period for pay-out once a claim takes place can range from 8 weeks to 52 weeks depending on your policy definitions
Shepherds Friendly offer a two-year limited payment option to complement their standard full-term coverage
The Exeter is a UK mutual with no shareholders, just members who get membership when purchasing a policy. They use profits to provide excellent customer service, including keeping premiums low and paying claims quickly.
Long and short claim periods are available. The short period is either 2 or 5 years and the long claim period is full-term cover
Two income protection products are available, Income One Plus for office workers and Pure Protection Plus for manual workers
Vitality has over 1 million customers in the UK market. Created in 2004 when Discovery and Prudential launched Pru-Health, it rebranded in 2014 and is now known as Vitality.
The minimum pay-out time once a claim has been approved is one month running out to one year.
Policy length of pay-out is up to 24 months under short term cover or coverage until you return to work under the full-term option.
Founded in Birmingham in 1841, Wesleyan specialises in providing tailored products to the professions including dentists, doctors, lawyers and teachers and professionals such as surveyors and accountants.
Wesleyan has a short-deferred period with an immediate payment (zero weeks) available and running up to 52 weeks.
It offers one of the most extended guaranteed payments in a short-term policy with a pay-out length of 5 years.
A leading multi-line insurer, Zurich, employs 55,000 in 215 countries offering life insurance products and services to individuals and businesses.
The income protection benefit can start from 4 weeks with Zurich with a deferred period of up to 104 weeks possible
Zurich offers both limited benefit and a full-term benefit period. The limited benefit pays out for up to 24 months once you stop working.
What Are The Benefits of Income Protection Cover?
If you are unable to work through illness or injury, maintain your lifestyle with a replacement income until you can either return to work or retire. This will depend on the level of cover that you choose and the length of the policy.
Because Income Protection is a flexible Insurance certain elements can be adjusted to match up with your life changes as they evolve. This could include gaps in employment and pausing cover until you return to work. Or other incentive benefits provided by your insurer could encourage gym membership or a healthier fitter lifestyle.
It is worth noting that any claim pay-out from an Income Protection policy is entirely free of all UK tax. If you are unable to return to the workplace, Income Protection policies can be tailored to make payments that can continue right up to your retirement.
Should I Consider Buying An Income Protection Policy?
Income Protection is a type of security that many people consider to be essential for long term financial stability. However, everyone has different personal and professional circumstances with individual needs for their families and loved ones. The main point to consider is, if you cannot work, would you be able to maintain your lifestyle, yourself or a family?
Important points to consider if this type of protection is relevant to your situation include:
Savings: If you were unable to work, do you have savings that can replace the loss of earnings from a salary? An accident, injury or illness may keep you off work for more than a year. Do you have the means to maintain yourself or your household?
Household Income: Is your household reliant on a single wage or do you have a partner that can provide enough financial stability to meet all of the essential outgoings to maintain living costs?
Financial obligations: Are there critical financial outgoings that would suffer should you be unable to work? Financial commitments may include mortgages, car and personal loans, other debt, school and university tuition fees and monthly household expenses.
By using an FCA regulated broker, like Protect Income Insurance who can compare all of the UK providers. Will enable you to do a single simple search and compare Income Protection Insurance Quotes from the UK’s Top Providers to get the best policy for you.
How Much Does Income Protection Cost?
By searching and comparing polices from all of the UK protection providers, you can get cheap Income Protection starting from just £5 per month. The premium limits will vary depending on the amount you are protecting, some policies can cost in excess of £100 per month. Trying to calculate the policy cost is complex, and different underwriters use numerous factors to produce a quote.
Things that will impact your monthly premium cost:
- The deferred period before a pay-out
- The level of cover required
- Pre-existing health conditions
- Length of coverage required
- The applicant’s age at application
- If you are a current or former smoker
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Should I Choose An Insurance Broker To Find The Best Policy?
When choosing to purchase your Income Protection policy, you can either buy directly with an Insurance provider or through a broker. There are many different reasons and benefits to use the latter rather than approaching a provider directly.
FCA regulated brokers, like Protect Income Insurance has no ties with a single provider and are free to get protection policy quotes from all the UK Insurance companies. This allows you to compare income protection quotes from all of the different providers. Matching your individual needs, budget and ensure that you have the best policy at a competitive premium.
By using an experienced independent broker who can provide you with a professional service and advice. You can be reassured that you and your loved ones are protected for the future. A proficient broker should be an expert in all of the different types of Income Protection. They should explain all of the different types of policy including the intricacies of this type of insurance and help you to make an informed decision.
Because Protect Income Insurance is an independent FCA regulated broker. Our expert team of specialists has the experience and the right knowledge to help you find the best Income Protection available for you and your loved ones. Compare Affordable Income Protection today to find the protection you need.
What Is Protected By Income Protection?
An Income Protection policy will pay out if you are unable to work due to an accident, illness which also includes total or partial disability. Each different provider has its own definition of partial or full disability before a claim payment will be paid.
It is extremely important to fully understand all of the options entirely within a policy and whether they are relevant to you and your family. A key point to remember is the importance of comparing all of the providers and not to rush into an Income Protection policy that may not relate to your individual circumstances.
What Are The Different Types Of Policy Protection?
Throughout the years that Income Protection has been available, many insurers have made this type of policy as easy to understand as possible. The main points to note about the different types of policy are:
Short Term Protection Insurance: This cover type has a cap on the duration of the replacement salary. A Standard policy length of protective cover is one or two years. However, some insurers do offer up to five years cover. A short term Income Protection policy is usually a cheaper alternative.
Long Term Protection Insurance: This cover type is the most expensive due to the length of cover available. A Long Term Income Protection policy will provide you with replacement cover until you can return to employment. Or in the worst case scenario, if you are never able to work again due to the severity of a disability. A claim pay-out could potentially last until your retirement.
ASU’s: All Income Protection policies are different and should not be confused between what they offer. An ASU policy. (Accident, sickness and unemployment) are on hold for the time being. However, other variations of these low-price alternative called AS (Accident and Sickness) policies are very popular and extremely affordable.
Similar to short-term Income Protection policies, they will provide cover for under five years; the main difference with ASU’s and AS policies is their lack of full medical underwriting.
At Protect Income Insurance, we mirror the guidance from other industry professionals, we also recommend taking out Long Term protective cover. Although it costs more than other alternatives but Long Term Income Protection provides that best financial peace of mind should you never return to work again. Compare Affordable Income Protection policies to find the protection you need.
Fixed Or Variable Benefits
Because this type of protection is extremely flexible you can choose to change your policy to match your professional and personal life. This could be a change in your premiums to be the either the same, increase or even decrease. Some of the many policy choices include:
Flexible Cover: With an Income Protection policy, you can decide when you want your replacement salary to begin following a pay-out and how long it should continue to pay.
Sum Assured: A key point to remember is, how much of your regular income you like covered if you cannot work. The higher the levels of cover, the higher the monthly premium price. Depending on the insurance provider, up to 70% of your wage can be protected.
Deferred Period: The deferred period is the time between when you submit a claim and when the payment starts. You can choose a start date from next week to one year. The longer the deferment period the cheaper the monthly premium, so choose carefully for this important Income Protection element.
Length of Pay-out: Depending on your choice you can replace your income for up to 5 years (short-term) which will be cheaper. Alternatively you could decide on the maximum protection (long-term) that will cover you until retirement but will cost more in your monthly premiums.
Age Limit: Very similar to Term based Life Insurance a policy will have an expiration date, this is when the policy matures and cover ends. Commonly many people choose to match this up with the retirement age.
Can I Choose My Income Protection Premiums?
The simple answer is yes. The monthly premium cost is calculated by the amount of cover you need. It is worth noting that part of your monthly premium calculation will include another factor, which can be chosen from:
Reviewable: The underwriter can review the level of cover at any time and is permitted to adjust the monthly premium upwards, similar to motor insurance. Upward policy revisions occur if there are events that see a surge of claims. However, premiums usually are relatively low cost at the start of the policy. A key point to note is that a reviewable policy can work out quite expensive over the policy duration.
Age-banded: This is defined as a premium which adjusts over time to reflect the changing age of the policyholder throughout the fixed term policy. Because older policyholders are more likely to make a claim, Age-banded premiums reflect this by increased premium costs. This mean that a policy is cheaper at the start but rise steadily over time.
Guaranteed: This option does not allow the underwriter to change the monthly price of your monthly premium. The monthly price is guaranteed unless the policyholder chooses to amend elements within the policy. Guaranteed premiums are a great value solution. Particularly if a policy is purchased on a budget, the premium will remain the same for the length of the policy.
What Policy Indexation Should I Choose?
A very important part of your Income Protection policy is choosing the right indexation. In a nut shell, indexation is the ability to tie your policy with the Retail Price Index (RPI) or other inflation benchmarks set by the UK government. Similar to other protection policies, there are three index related cover options:
Level: This choice means that the level of premium and resulting claim pay-out will stay the same for the length of the policy.
Increasing: Also referred to as index-linked protective cover, monthly price levels will rise in line with the increase of the official rate of inflation.
Decreasing: Many people choose this option to mirror large financial responsibilities like the repayment of a mortgage, declining coverage matches the cost levels fall steadily until maturity.
Other Income Protection Policy Additional Options
Income protection does not provide cover if you are not working. Therefore if there is a period when you are not working, it makes sense to notify your insurance providers and pause your policy. Continuing to make monthly payments with no chance of a pay-out when your income is reduced will only add further stress to you.
Childcare benefits can be added to your Income Protection policy, which can mean a further payment made to you. If you cannot work, childcare benefit pays out a fixed amount for each child in your household. It intends to pay for childcare such as child-minders, live-in au pairs or other services as you concentrate on your recovery.
Also you may wish to include specified trauma or injury to your policy from the start. If you cannot do your job and do make a claim, the additional payment adds on to the regular monthly payment.
A further additional feature available is a Death Benefit, which gives designated beneficiaries a single amount if you die while receiving your financial award. The death benefit may not pay out if your condition proves to be fatal.
What’s The Difference Between Income Protection For Employees and the Self Employed?
Employees: Because an employee of a business is likely to receive some form of salary protection from their employer. They may continue to be paid their wage from one month to one year after being unable to return to an occupation.
Income protection for an employee can be arranged to match these benefits, which will mean that the deferred period following a claim can start when your regular monthly earnings cease. A longer deferred period will reduce the cost of coverage dramatically.
Self-employed: Working as self-employed means, it is unlikely that you have the financial safety net that employees have. Which means, if you cannot work, the UK government statutory sick pay is the only protection option. Because it provides just under £100 a week for a maximum of 28 weeks, it is unlikely provide financial stability when it is most needed.
The primary consideration for a self-employed person when choosing to take out Income Protection will be the deferred period. Rather than mirroring an employer’s terms, a self- employed person needs to match against how long they can maintain their lifestyle without an income. They may need coverage to start pretty much straight away.
Is Income Protection Taxable?
Personal protection policies and Limited Company have different tax implications including:
Personal Income Protection: This type of policy for employees and self-employed and self-traders is a payable benefit free of UK taxation. This is because the payment of premiums are made from post-tax income.
Director Income Protection: A Policy is created in the name of the limited company, and it is the company that pays the monthly payment amount. The business pays it from pre-tax income which allows for a higher payable amount. Which can cover up to 80% of regular earnings, compared to a maximum of 70% through a personal protection policy.
By using an FCA regulated broker, Like Protect Income Insurance who can search and compare all of the policies available. You can be reassured that we help our customers tailor policies closely aligned to their lifestyle. By applying for a free no obligation quote today can offer peace of mind and protection for the future. Compare Affordable Income Protection policies and find the protection you need.
If you have made a complete recovery between claims then yes. However, if it is for the same illness or injury incident, then it is not possible to claim again.
All Insurance providers typically make payments one month in arrears once the deferment period has expired.
Payment protection insurance covers accidents and illnesses which stop you from working. It will not pay-out if you lose your job.
Income protection provides a regular monthly payment to policy holders up to 70% of your typical earnings if you cannot do any paid employment. A Critical illness policy provides a one-off amount if you are diagnosed with a specified illness or disease.
Life insurance will only pay-out if the policyholder dies by making a payment to family and loved ones. Income protection assumes that you will eventually return to the workplace and the payment is made to the policyholder.
If you are an employee and your company provides sick pay as part of employee benefits, this will need to expire before your income protection cover can pay-out.