Income Protection: What Does It Cover?

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What Does Income Protection Include?

When Do Payments Begin?

Who Might Find Income Protection Useful?

Finding the Right Cover

Income protection insurance provides financial support if you’re unable to work due to illness or injury.

With everyday expenses continuing, having this type of cover in place means you can focus on recovery rather than worrying about your income.

What Does Income Protection Include?

A policy typically replaces a percentage of your pre-tax earnings, usually between 50% and 70%. These tax-free payments can help cover essential costs, such as mortgage repayments, rent, and household bills.

While income protection insurance doesn’t cover redundancy, it provides financial support specifically for health-related absences from work. Policies can be short-term or long-term, depending on your needs.

Short-term cover provides payments for a set period, such as one to five years, while long-term protection continues until you’re fit to return to work or reach retirement age, depending on the policy terms.

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When Do Payments Begin?

Payments don’t start immediately, as most policies include a waiting period, known as the deferment period. This is the time between being unable to work and when your payments begin.

It can range from a few weeks to several months, with longer deferment periods often resulting in lower monthly premiums.

The right choice depends on factors such as whether you have savings or employer sick pay to rely on in the short term.

Who Might Find Income Protection Useful?

Income protection can be valuable for anyone who relies on their salary to cover everyday expenses.

Self-employed individuals, for example, don’t receive sick pay from an employer, meaning a loss of income due to illness or injury could have a significant financial impact.

In these cases, self-employed income protection insurance can offer tailored cover, ensuring a steady income while you recover.

Likewise, those with ongoing financial commitments, such as mortgage repayments or rent, may prefer the reassurance of knowing they have financial support in place if they’re unable to work.

Whether employed or self-employed, having the right policy means you won’t have to rely solely on savings during extended time off.

Finding the Right Cover

With different policies available, the right choice depends on your circumstances.

Employment type, financial commitments, and how long you could manage without an income all play a role in selecting the most suitable cover.

If you’re thinking about income protection insurance, our mortgage and protection advisors can talk you through your options, helping you understand how different policies work and which level of cover might be right for you.

Having the right protection in place means you can focus on your health, knowing your financial commitments are covered if you ever need time off work.