Income protection insurance pays out a regular tax-free income to a claimant in the event of their being unable to work as result of serious illness or injury.
The policy is designed to provide you with a monthly income to allow you to meet all your essential commitments as well as a measure of comfort if you are struggling to make ends meet.
The maximum level of protection will represent a proportion of your regular salary so as to encourage claimants to return to work should they become fit healthy again.
It is not the case that the state will provide people with enough money to get by comfortably.
Whilst the Employment and Support Allowance (ESA) provided by the government may be sufficient to help people manage in the short term, it is unlikely that it will stretch to allow them meet mortgage repayments.
You may, however, be entitled to income support from your employer. It is worth taking this into consideration when looking at alternatives as it may change your needs regarding your income protection.
Unlike other protection policies, which may only provide a replacement income for a limited period of time, you can claim income protection for as long as you are unable to work due to sickness or injury and before your policy ends.
The policy will cease, however, when you cancel or miss payments and usually when you reach retirement. Regardless of whether or not you return to work, the protection will also end if you recover and are no longer incapacitated.
The maximum amount of benefit you receive will be determined by your current earnings. This is usually a maximum of 50% of your salary or around £1500 a week, although this varies between insurers.
You can also get income protection even if you do not have an income per se. However, there is normally a restriction on the level of benefits you receive, usually around £20,000 per year, although this can vary.
Income protection covers illness and injury only and will not provide cover if you are made redundant.
Income protection is also available if you are self-employed, however the level of benefits you receive are calculated differently than if you were an employee.
The amount you receieve will be determined by your share of the annual pre-tax profits.
People make claims for a variety of reasons, for both physical and mental conditions. Some examples may include:
In order to qualify for an income protection policy cover you must usually satisfy the following criteria: