Exchequer Risk Management
No.3 Siskin Drive, Coventry, CV3 4FJ
Opening Hours: 8:30am - 05:30pm

Income Protection

Income protection aims to insure you should you become ill or injured and are suddenly unable to work.

01

Income Protection

Income protection pays a proportion of your lost earnings, which could help cover your monthly outgoings such as covering debt repayment, bills and other costs.

02

Peace of Mind

With income protection, you can continue to meet your financial commitments if you are forced to take an extended break from work.

03

Working Conditions

Income protection is especially useful for people working in dangerous industries who want to be sure their finances, such as a mortgage, will always be covered.

How much income protection will I gain?

The amount of income you are allowed to claim will not replace the exact amount of money you were earning before you had to stop work. You can expect to receive about a half to two-thirds of your earnings before tax from your normal job. This is because some money will be taken off for the potential state benefits you can claim, and also the income you get from the policy is tax free.
You can’t claim income protection payments straightaway if you fall ill or become disabled. You usually have to wait a minimum of four weeks but payments can start up to two years after you stop work. This is because you may not need the money straightaway as you may get sick pay from your employer or you may be able to claim statutory sick pay for up to 28 weeks after you stop work.

What does an income protection insurance policy cover?

What you’re actually covered for depends on the type of income protection policy you take out. How long you’re covered for also depends on the type of policy and insurance provider you choose.

  • Short-term income protection can cover you for accidents, sickness and unemployment if you’re unable to work for a short period of time, for example, if you break your leg or are made redundant. Policies typically cover you from six to 12 months, although some policies will provide cover up to two years.
  • Long-term income protection will cover you against accident and sickness if you become seriously ill or permanently disabled. It won’t cover unemployment. If you’re unable to work again, long-term income protection could provide you with a regular monthly income until you retire or the end of the policy term – whichever is sooner. Check with your provider to see the exact terms.
icon Do you need income protection insurance?

Sickness, injury and redundancy can suddenly impact your income. These circumstances can quickly affect peoples savings you’ve managed to build, with your mortgage or rent, utilities, food and travel still to pay. Income protection insurance could give you the security of a regular income so that, if something happens, your monthly outgoings are covered.

For more information, talk to our team of Experts

How much does income protection cost?

  •  Salary: Simply put, the more you earn, the more you’re looking to cover, which means your protection repayments will be more expensive.
  •  Job: If your job is considered to be high risk, the higher your premiums are likely to be. Insurance providers tend to group jobs into four categories of risk. So, low-risk jobs like accountants and office workers would be in Class One, while high-risk jobs like builders and mechanics would be in Class Four.
  •  Monthly outgoings: If you have a mortgage or bills to pay, you’ll need more cover to pay your existing expenses if you’re unable to work.
  •  Debts: If you have outstanding loans, credit or other debts, you’ll need enough cover to pay these costs too.
  •  Marital status: If you have a spouse, civil partner and/or a family, you could have people who are financially dependent on you, meaning you need more cover.
  •  Age: The older you are, the more likely you are to become ill or injured, meaning you’re a higher risk to your insurance provider. As you get older, you should expect to pay more for your monthly premiums. Age: The older you are, the more likely you are to become ill or injured, meaning you’re a higher risk to your insurance provider. As you get older, you should expect to pay more for your monthly premiums.
  •  Health: If you have pre-existing health conditions, you may be more vulnerable to severe illness that might force you out of work, meaning you’ll be more likely to make a claim. If you smoke, you should also expect to pay more, as you’ll be considered a higher risk.
  •  Lifestyle: If you’re active, fit and healthy, this can be helpful. But if you take part in extreme or adventure sports, you’re more likely to be injured and need to make a claim.

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    Income Protection Insurance FAQs

    Is income protection the same as payment protection insurance?

    Income protection should not be confused with Payment Protection Insurance (PPI). PPI, only covers a specific debt if you’re unable to work because of injury, illness or unemployment. For example, it could cover your credit card, mortgage or loan repayments. Income protection gives you a tax-free monthly income that you can use as you would your regular income.

    If you’re self-employed, you won’t be entitled to typical employee benefits, like sick pay or redundancy pay, so income protection is something you should consider. It can give you the peace of mind that you’re financially protected if you’re unable to work.

    With most policies you usually have to wait at least three months after you stop work for payments to start. This is called the deferred period, or waiting period. Some deferred periods last up to two years. You have a choice of deferred periods. This is usually done to match sick pay and the longer the deferred period the more affordable the premium is. For example, if you have six months of sick pay, then you would set your deferred period to six months.

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