Income Protection

Income Protection

Income Protection Insurance is designed to protect your income in the event of you not being able to work due to illness or disability.

Mortgage Payment Protection Insurance

Income Protection Insurance or Permanent Health Insurance is designed to protect an individual’s income in the event of being unable to work due to illness or disability and is available if you are either employed or self-employed. Some insurers will also offer Houseperson benefit, which is a lower level of cover to allow for the effect on a person who is responsible for running the home.

The plans can be set up to run for a pre-determined term or until retirement age.

Unlike life policies the benefit on an Income Protection plan is paid out in monthly instalments as a replacement for lost income. Payments continue until the end of the term or until you are able to return to work.

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If you are in a position to return to work you will need to resume your premiums to ensure that cover continues. There is no limit to the number of times that you can claim against this type of policy.

Underwriting requirements are relatively strict for Income Protection Insurance and will consider health, medical history, occupation, hobbies, gender as well as smoker status.

Definitions of Cover

Income Protection Insurance is available on ‘own occupation’ basis or ‘any occupation’.

Own Occupation:
the benefit will be paid if you are unable to perform your current job.
Any Occupation:
the benefit will only be paid if you are unable to do ANY job.

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Limitations of Cover

The maximum amount of monthly income that can be insured is limited to around 65% of current income at the time of application, although this varies among providers.

In the event of a claim, the actual amount paid out is based on the gross income, plus any benefits in kind in the 52 weeks prior to claim, but never more than the sum insured. For the self-employed it is based on trading profits during 52 week period prior to claim. To ensure that the benefit keeps pace with income, your policy should be reviewed regularly.

The monthly benefit is paid out free of UK income tax, however the amount payable can be affected by sick pay, pension payments and state benefits.

Increases to Cover
While some policies are set to a level amount of cover, it is possible to opt for cover that increases each year in line with the RPI (retail price index).

Other policies allow for significant increases in cover without further evidence of income.

Career break options are available from some providers who will continue to offer cover at a reduced level, known as Housepersons Benefit.

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Deferred Periods

The deferred period is set when the policy is taken out. This is the period of time which passes after the illness or disability occurs before the benefit commences. There are a number of options available, usually 4, 8, 13, 26 or 52 weeks.

The deferred period you select will be guided by the resources available to you to fund your income needs ie savings. The longer the deferred period the lower the premium will be for the policy.

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Accident, Sickness and Unemployment

Often referred to as ASU or Redundancy Insurance, this is a special type of insurance plan that pays out if you lose your income due to an accident, illness or redundancy.

There are a range of options available. You can cover your self just for unemployment cover, just for accident or sickness cover or you can take out full cover for both. You can also cover yourself for up to either 12 months or 24 months of illness or unemployment.

If you are self-employed, the income paid is normally calculated on the amount of your taxable income, or profits, during the 12 month period prior to you becoming unable to work.

If you are interested in longer term illness cover i.e. if you become incapacitated and unable to work for a long time then you should look at income protection insurance.

This is a renewable contract and has renewable premiums and cover. The insurer can refuse to reinsure.

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Please note: For Accident Sickness & Unemployment cover we offer products from a selected panel.

Enquiry Form

To get a competitive quote Complete the basic information below. We will search all the major life providers to give you the best deal.

The information collected will be used solely for the purposes of providing background information when contacting you to arrange an appointment. Upon receipt of the enquiry form we shall contact you by telephone to discuss your options.

Select Single or Joint
Single Joint
Client 1
First Name
Male Female
Date of Birth
Do you smoke? Yes No
Type of Insurance required
How long do you need cover for?
How much cover do you need?
Telephone Number
Email address
1 Source: Department for Work and Pensions Website July 2012