Income protection insurance plays a fundamental part in making sure individuals don’t lose their income in case of long-term illness. This type of protection is therefore essential for individuals working a busy job, or for families who might be relying heavily on a particular member’s income.
In this blog post, I will explore the features of income protection policies.
Income protection vs critical illness: which one is for me?
Believing that income protection is the same as critical illness is an extremely common misconception in the insurance industry.
There are significant differences between both types of insurance, and both have their unique merits.
Critical illness protection pays a one-off lump sum in case the policy is triggered. The proceeds can help individuals cover the costs of these illnesses, or to help clear major debts such as a mortgage – removing the burden of financial worry in such a difficult time.
The scope of a critical illness depends on the provider, but it usually covers some types of cancer, heart attacks, strokes, and other conditions.
In contrast, an income protection plan provides a regular income in case the policy is triggered, and its purpose is to provide a regular income so you are able to meet your financial liabilities such as your mortgage and daily expenditure.
Because it pays a regular income, income protection is also known as permanent health insurance.
Why protect your income?
Income protection typically pays out until you go back to work, or until you retire, pass away or reach the end of the policy term.
Coverage always depends on the policy, but most policies normally cover most illnesses that incapacitate you from working for any period.
Income protection can be claimed as many times as you are unable to work, and for as long as the policy lasts. Normally, policies pay out between half and 65% of your income when you’re not working.
Your employer might offer income protection as part of their benefits. But the level of income your employer offers in case of illness only lasts a particular period – typically six months, sometimes a year – after which you move onto statutory sick pay, so it’s important to understand the details of the policies in your workplace.
Choosing the best policy
The price of a policy will depend on your circumstances, such as your age and health, the percentage of income you’d like to cover, the range of illnesses, and the type of premium.
There are many insurance companies offering this type of protection, and it’s important to know what to look for when planning for protection.
At Partners Wealth Management, we have longstanding relationships with brokers and insurance companies that enable us to source the most cost-effective deals on policies that best suit individuals based on their circumstances.
We always aim to understand all aspects of your finance to ensure you’re covered in the most appropriate, cost-effective way. Talk to us to learn more about our protection services and how we can help you keep your finances in check for the long term.
Ian RoderickBusiness Manager, Head of Protection
iroderick@partnerswealthmanagement.co.uk
020 7444 4038
Please note that this article is intended for educational purposes only and should not be taken as investment advice. Tax rules are subject to change and taxation will vary depending on individual circumstances. The value of investments can go down as well as up and you could get back less than you invested. Investment in funds will not be suitable for everybody and you should make yourself aware of the risks before investing and if you are unsure, you should seek professional advice.