Income protection FAQs. 

How much cover should I have?

It is best to calculate what your essential monthly outgoings are, and then take out enough insurance to cover all of these? Your outgoings may include:

• Rent or mortgage payments
• Loan repayments
• Utility bills
• Council Tax
• Mobile phone
• Landline phone
• Insurances
• TV Licence
• Food & general living costs

However Income Protection providers have a limit to how much cover you can take out. Typically, you can insure up to 50% to 75% of your gross (pre-tax) salary. Every insurer differs.

Our professional advisers will be able to offer you further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

Why am I unable to insure 100% of my income?

We are all likely to have to take time off work because of illness, but we know that we need to return to work to ensure we can keep paying our bills. But if you knew you would receive full sick pay indefinitely would you really want to return to work? Probably not! In addition the proceeds of Income Protection policies are paid tax free. Therefore, insurance companies set a limit on what percentage of your income they will insure you for to ensure that you are not better off financially by claiming and as an incentive for you to return to work.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

Will I pay tax on the benefit I receive?

No. Based on current legislation you will not pay tax on income received from an Income Protection policy.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

Why should I consider this type of policy to cover my mortgage?

Income Protection is an excellent way to ensure that you can continue to you're your monthly mortgage payments, plus other bills, in the event of illness or injury.

You may have heard of Accident, Sickness and Unemployment insurance (ASU) or Mortgage Payment Protection. These types of policy will only pay a claim for 12 months, and if you return to work the policy will end. The insurer has the right to cancel the policy at any time and it is reviewable and also renewable on an annual basis. This means the insurer can cancel or increase the premium at the annual review date. Another drawback of ASU is that you can only cover a percentage of your mortgage monthly repayment plus some additional costs (which will vary from insurer to insurer). This means that while your mortgage payment is covered, you may not be able to cover all of your monthly outgoings.

Income Protection has a much broader long term outlook regarding its protection of your mortgage repayment. The product is flexible, incorporating a deferment period from when the benefit will start to be paid. This enables people who have employer's benefits the option of a lower premium if they wait a certain period of time before the insurance company begins to pay out.

The main advantage of the Income Protection over ASU cover is the fact that it will pay the claim indefinitely, ie. until you are well enough to return to work, or until you retire. This will ensure that mortgages can be covered over the long term.

The maximum benefit that can be covered per month is usually between 50-65% of your gross income, less any state benefits that the policy holder may be entitled too. This enables policyholders to cover both the mortgage repayment and any other bills that they may have.

Income Protection is a more prudent long term option for protecting your mortgage repayments. Not everyone will recover within 12 months of becoming ill and be able to return to work and therefore Income Protection cover will ensure that these people can maintain a standard of living similar to that of when they were working.

Our professional advisers can offer much more detailed advice on the different income protection polices that are available to you and what specifically each would cover you for. We will save you both time and money by searching the Income Protection products available within the UK market for you, finding the most suitable product for your circumstances.

What sort of illnesses can I claim for?

You can claim for any illness or injury which prevents you from working.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

What is the difference between Income Protection and Accident, Sickness & Redundancy (ASU)?

Income Protection and Accident, Sickness and Unemployment policies (ASU) are both designed to replace a person's income should they become incapacitated and are unable to work. There are several fundamental differences between the two plans, which should be noted.

Income Protection policies are designed to provide the policyholder with a replacement income in the event of a long-term sickness or disability. Payments are usually made when the policyholder cannot undertake their own job due to illness or injury.

Accident, Sickness and Unemployment (ASU) policies will also protect a person's income against illness or injury. However, they will also protect a person's income if they were made redundant by their employer. Some ASU policies will also allow you to choose whether you want to receive benefits for accident and sickness only, unemployment only or all three.

Income Protection will pay out a guaranteed level of income every month for as long as your incapacity continues; if necessary until retirement age.

Normally, there is a maximum benefit payable from such a policy. This is usually between 50-65% of a person's gross annual income.

ASU benefits are usually payable for a maximum of 12 or 24 months, depending on the insurer. Usually the maximum amount of benefit is your mortgage or rent payments plus 50%. Again, this depends on the insurer. The premium will be calculated as a percentage of the amount of monthly benefit you would like to receive and hence the higher the amount of cover you would like the higher the associated premium costs.

Depending on the premium that you're prepared to pay, the monthly payments can be linked to the Retail Prices Index (RPI). This means that they automatically keep pace with the cost of living a process known as 'inflation proofing'. Income Protection policies will allow unlimited claims. Therefore if you claim and then go back to work, you will be able to claim again, an unlimited number of times.

ASU policies will only allow a singular claim at which point the policy will be cancelled, meaning you need to re-apply to set up a new policy. You do not have the option of 'inflation proofing' such a policy. The benefit, once chosen, is fixed and if you wish to increase it then you must apply again for a new policy with a new benefit.

For further information on the differences between a number of different Income Protection polices you need look no further than the trained advisors, who will search the entire UK market for Income Protection on your behalf, to find the most suitable product for your circumstances.

What is a guaranteed premium?

A guaranteed premium is fixed for the term of your policy. This may be slightly more expensive initially, but you will be protected from future increases on the premiums.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

What is a reviewable premium?

Reviewable premiums are premiums which may increase in the future. Some insurers increase premiums every year, and others may review them every 5 years. In general, reviewable premiums start off lower than guaranteed premiums, but tend to end up being more expensive in the later years of the policy.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

My employer provides sick pay. Can I have Income Protection?

Yes. However you cannot claim on the Income Protection policy at the same time as you are receiving employer’s sick pay. Therefore the deferred period can be set so that the Income Protection claim starts from when your employer's sick pay ends.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

What deferred periods are available?

A deferred period could also be called a waiting period. It is the period of time that you need to be off work due to illness or injury before your Income Protection policy begins to pay out. This time period is selected by each individual and is normally dictated by the sickness benefits that your employer provides. If you are self employed it may be dictated by how long you feel you could rely on your savings for.

Thus if your are Self Employed or receive no sickness benefits from your employer, then you will usually require a very short deferred period i.e. less than 1 month. However if you are employed and receive 12 months sick pay through your employer, then your deferred period would be set to 12 months, so that it starts when your employer's sick pay ends.

Options of Day 1 cover, 1 week, 4, 8, 13, 26, 52 or 204 weeks are available.

The deferred period you choose will affect the price of the policy. The shorter the deferred period, the higher your premium will be as there is in increased likelihood of you making a claim.

For further information on Income Protection you need look no further than our professional advisors. Our advisers are salaried, and are not paid commission on the products that they sell, meaning that they will offer truly unbiased advice, and obtain a quote from the entire marketplace to find the most suitable policy for your individual circumstances.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

How long will the benefit be paid for?

The benefit will be paid either until you are well enough to go back to work, or until the end of the policy term. One of the main benefits of Income Protection is that you are allowed to make unlimited claims. Therefore if you claim and then go back to work, you will be able to claim again

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

What are the different definitions of incapacity used to assess a claim?

When taking out a policy you can usually choose which of the following definitions will be used to assess a claim if you become ill.

Own Occupation: You will be able to claim if you can no longer do your own job. You will not be expected to seek alternative employment which you could do instead with your illness or injury.

Suited Occupation: You will be able to claim if you are unable to perform your own occupation or any other occupation to which you are suited by training, education or experience.

Any Occupation: You will only be able to claim if you are unable to perform any occupation.

Work Tasks: You will be able to claim if you cannot perform a number of everyday work tasks, such as walking, lifting, reading and hearing.

Activities of Daily Living: You will be able to claim if you cannot perform a number of everyday living tasks, such as dressing, washing or using the toilet.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

How much does Income Protection cost?

It is best to calculate what your essential monthly outgoings are, and then take out enough insurance to cover all of these? Your outgoings may include:

• Amount of benefit (The more you insure for, the higher the premium)
• Length of the deferred period
• The length of the policy (ie. the age it will run until)
• Whether your policy is linked to inflation
• Definition of incapacity
• Your age
• Sex (women usually pay more)
• Your occupation
• Your medical history
• Smoker or non-smoker (smokers usually pay more)

(Note that not all Income Protection providers have the same views on the above factors.)

Is the price of an income protection plan really too much to pay?

Like most people you probably insure your possessions - replacing them could be really expensive! Your personal belongings, the contents of your home, your car, your house, are probably all insured. But what about your most valuable asset?

The source of our income is probably the most important asset that we all possess. Without it, our entire lifestyle is at risk. And one of the biggest threats to our ability to work is our health - something that most of us take for granted.

The table below shows an example of how much you could spend on other types of insurance.

Example provided by Unum

The likelihood of suffering from a long term illness or injury is more likely than you might imagine, and could have serious consequences for your financial security – and the security of those who depend on you. Therefore this is one of the most important insurances and should be a priority.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

What are the typical exclusions and limitations?

There are common exclusions on most Income Protection plans, including:

• Disability due to, or caused by, HIV/AIDS
• War
• Normal pregnancy and childbirth
• Misuse of alcohol or drugs
• Self-inflicted injury
• Failure to follow medical advice
• Criminal acts
• Residing outside the UK
• If you have a pre-existing condition, the insurance company may state that they will not cover you for any related injuries to that condition

Note that not all Income Protection providers apply these exclusions, however they are typical of most providers.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

I'm self employed. Can I have Income Protection?

Yes. Income Protection insurance is vital for self employed people, as you do not have the luxury of receiving sick pay from an employer

A typical basis for payment is your pre-tax share of the gross profit after deduction of trading expenses, in the 12 months immediately prior to the date of your incapacity. Some policies operate an average over the last 3 years as they realise that self-employed people often have a fluctuating income and it is unfair to penalise you if the year before your accident was unusually bad.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

Can I take out such a policy if I do not have a job / am a house person?

No. Based on current legislation you will not pay tax on income received from an Income Protection policy.

Yes. This benefit is available for people who are not in paid employment but who need an income should they become incapacitated and be unable to carry out their daily tasks. It is designed to pay out a regular tax free income to help cover the cost of childcare, nursing costs or household help.

The level of benefit available is determined by the chosen insurer, but could be as much as £2,000 per month.

You will be able to claim if your illness or injury leaves you unable to perform a number of essential abilities (eg. 3 of the abilities) for a prolonged period.

The essential abilities often include:

• Sitting
• Getting up from a chair
• Walking
• Lifting
• Bending and kneeling
• Driving
• Reaching with your arms
• Seeing
• Walking up and down stairs

Endsleigh Financial Independent Tailoring can offer detailed advice on policies that will help to protect house people/unemployed people. We endeavor to save you time and money by searching the entire Income Protection market on your behalf to find you the best policy to suit your individual needs.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

Why is Income Protection more expensive for women?

When underwriting insurance policies, insurers base their premiums on a number of factors, which may affect the claims cost. One of these factors is gender.
Income Protection costs more for women because statistics show that:

• Women are more likely to claim on the policy
• On average, women's claims are paid for longer.

Note that the price difference between men and women does not apply to all insurers, but to the majority.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

I do a hazardous/high-risk job. Can I have Income Protection?

In some jobs, you are more likely to have an accident, so premiums are higher. Here are some examples of the risk associated with different occupations:

• Very safe: office manager, accountant, librarian, secretary, lawyer, optician, receptionist.
• Fairly safe: sales person, baker, dog-breeder, post worker, midwife, medical practitioner.
• Fairly risky: nurse, teacher, gunsmith, mechanic, midwife, night porter, interior painter.
• Very risky: bricklayer, plasterer, timber merchant, landscape gardener, gas welder, HGV driver, builder, fire fighter.
• Uninsurable: (except with certain, very specialist insurers): airline pilot, footballer, oil rig worker, stunt man, armed forces, the police force

For example, a builder may pay a higher premium than an office clerk due to the higher risk nature of the job. However there are specialist insurance providers who do not charge you more for having a higher risk occupation, and therefore they may be more suitable for you.

Therefore it is important to seek advice on this area. Our independent advisers will search the entire marketplace for you and find the most suitable provider for your occupation.

I do a hazardous sport. Can I have Income Protection?

If you take part in a hazardous pastime such as rock climbing, mountaineering, scuba diving, motor sports or caving, you may be required to fill out an additional questionnaire relating to the activity in which you participate.

If it is then regarded as higher risk, you may be asked to pay a slightly higher premium than somebody who does not take part in this event, due to the increased risk of injury leading to time off work.

Our professional advisers will be able to provide further information on how a hazardous pastime could affect you Income Protection premiums. We will save you time and money by searching the entire Income Protection marketplace on your behalf, to find the most suitable policy for your circumstances.

My job requires me to work abroad. Can I have Income Protection?

This depends on how long you are going for, and whereabouts you are going. If you are going abroad for a couple of weeks to a fairly 'safe' county, then this should not be a problem. However if you plan to go abroad for longer, or are going to a 'high risk' country, then certain insurers may decline your application.

If you are going abroad, and would like to find out whether you can have Income Protection, please do not hesitate to contact one of our professional advisers, who will research the entire Income Protection marketplace and explain the options to you.

I have an existing or previous illness/medical problem. Can I have Income Protection?

This depends on the type of illness you have had. For example, if you have been off work due to a leg injury, then you will still be able to have Income Protection insurance, however it is likely that an exclusion would be placed on the policy for this particular condition. For example, if you have suffered with a back problem, then the insurance company would probably not pay out on a claim if it is directly attributable to the existing back problem.

Some companies will cover the pre-existing condition, and not make any exclusion on the policy at all. However they may increase your premium to account for the increased risk of you claiming on the policy. For example, if you have had problems with your back in the past, then your back may have been weakened, and anything simple in the future could put it out again i.e. lifting items or any minor fall.

When you apply for Income Protection you will be required to complete a medical questionnaire. This enables the insurance company to underwrite the policy and decide whether they will accept your application. The underwriting process may involve obtaining a medical report from your GP, or a nurses screening examination.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

What if I become unemployed, or decide to have a career break?

Most companies offer a 'career break' option for Income Protection insurance, which means that cover can be suspended for an agreed amount of time. Premiums and cover will therefore be suspended until you decide to re-commence the cover, and usually this means that no further medical evidence will be required.

Some companies offer to continue the cover during this time, and you would be able to claim if you were unable to perform certain 'essential abilities'. For example, if you were ill and your partner had to have time off work to look after you, then you may require the ongoing income. To see if your policy includes this option you should check your policy documents.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.

How do I make a claim?

Income Protection policies allow unlimited claims. You can also claim an unlimited number of times for the same illness or injury.

To make a claim you simply contact your Income Protection insurer by email, letter or telephone, within the required notification period, and they will send you a claim form to complete and return. The claims process may vary slightly between insurers, and further information on the claims process of your insurer will be provided by the when you take out the policy.

What happens if I go back to work following a claim?

Your benefit will no longer be paid but the policy can continue. If you return to work at a lower rat of pay then with most companies you can claim a proportional benefit to make up for the money you will lose.

Our professional advisers will be able to offer further advice, and search the entire marketplace on your behalf to find you the best policy to suit your individual circumstances.