Income Protection

What is it?

• An Income Protection plan is designed to pay out a regular income in the event you are unable to work due to an accident or illness. However, these policies do not pay out in the event of redundancy/unemployment.
• These types of plans continue to pay out an income as long as you are unable to return to work, or up until the end date of the policy The term is typically set to your normal retirement age or to the end of a liability, such as your mortgage term.
• The insurance policy requires full medical underwriting but in return it is fairly extensive cover that covers most illnesses / accidents that leave you unable to work.
• It normally pays out a proportion of your income, generally up to 65%. This is because you will also receive state benefits and the payments are tax-free.
• Payments can be set to increase with inflation.
• Normally has a deferred period before payments start (minimum 4 weeks but usually 6 months)
• Can be claimed as many times as needed during the policy term.
• This type of plan is quite often seen as the foundation of any financial planning as it is likely that other plans, such as your mortgage, will have to be given up if you do not have sufficient income coming into the household.

Who is it for?

• This type of plan is designed for anyone who is working (employed or self-employed). It’s worth pointing out that even if your employer provides sick pay, it is unlikely to last for longer than twelve months and so ongoing protection is essential. Plans can be adapted to fit in with any existing protection you might have.
• The plan will have no cash in value at any time and will cease at the end of the term. If premiums are not maintained then cover will lapse.