Life is unpredictable, and if illness or injury ever stops you from working, the financial impact can be huge. Income Protection is a type of insurance that steps in to replace a chunk of your income if you can’t work due to health reasons.
But is it a worthwhile safety net? Let’s look at how it works, the benefits, and what to consider before signing up.
Why Consider Income Protection?
• Pays Your Bills: Income Protection ensures you can still cover your mortgage, rent, or other essential expenses while you recover.
• Flexible Coverage: Unlike Critical Illness Cover, this policy can provide regular monthly payments for a wide range of health conditions, not just the most serious ones.
• Long-Term Support: Depending on your policy, payments can continue until you’re well enough to return to work or even until retirement age.
Are There Any Downsides?
• It Can Be Costly: Premiums are based on your age, health, job, and how long you want the payments to last. Riskier professions like construction tend to have higher premiums.
• Waiting Periods Apply: Policies often have a ‘deferment period’ before payments start. The longer you’re willing to wait (e.g., 3 or 6 months), the cheaper the premiums.
• Not All Earnings Covered: Most policies replace a percentage of your salary—typically 50-70%—to incentivise returning to work when possible.
The Facts About Income Protection
Individual income protection claims totaled £177 million—a 2% increase from the previous year—with an average payout of £9,425. Musculoskeletal conditions like neck and back pain were the most common reason for claims, while mental health claims had the highest total value at £37 million.
Notably, insurers approved 98.3% of individual claims in 2023, demonstrating a high acceptance rate.
(Source: ABI UK)
Is It Right for You?
Income Protection is a smart choice for anyone relying on a regular salary to pay their bills. Whether you’re self-employed, the main earner in your household, or simply want extra peace of mind, it can be a game-changer if life takes an unexpected turn.
When choosing a policy, consider the waiting period, how long payments will last, and whether you have savings or other benefits to rely on.
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