What you need to know about Income Protection Insurance

20 September 2023

What is Income Protection Insurance?

It is a type of policy designed to provide a regular income if you are incapable of working due to illness or injury. Unlike other types of insurance that pay a lump sum, income protection provides a steady stream of income to cover your living expenses, allowing you to maintain your standard of living.

How does Income Protection Insurance Work?

Here is a quick overview of how income protection insurance usually works.

Choosing a Benefit Amount

First, you have to choose the monthly benefit amount you wish to receive when you purchase the policy. This amount is usually a portion of your income that will be replaced if you are unable to work.

Waiting Period

Your policy will also require you to choose a deferred period. It is the period of time between your incapacity and the time when the insurance starts paying out. It typically ranges from 1 to 12 months.

Payment Period

You can arrange your policy to cover you until you are well enough to work again, reach your retirement age, end of your mortgage term or for a fixed period (typically 2 or 5 years). Once your claim period has been confirmed, the monthly premium you pay your insurer each month will be determined by your age, health, occupation, lifestyle, and level of cover required.

Claims Process

In the event you need to make a claim, you will need to notify your insurer of your illness or injury as soon as possible. From the first day that you are unable to work, your deferred/waiting period will commence. Once you have reached the end of your deferred period, your insurer will begin paying your chosen monthly income amount. Seeking Income Protection advice from an expert at Visionary Finance means that you’ll have our support from the very start of your claim and throughout your recovery.

Types of Income Protection Insurance

Short-term Insurance

With this type, you can get coverage for a specified period, usually between one to five years. This can be more affordable than a long-term coverage option but will only cover a percentage of your income up to the end of your specified period. However, having some Income Protection in place will provide you with some peace of mind.

Accident, Sickness, Unemployment (ASU) Insurance

This type of insurance is designed to cover specific events like accidents, sickness, or involuntary unemployment.

Benefits of Income Protection Insurance

Income or salary protection insurance in the UK provides a number of benefits. It is a crucial investment tool for safeguarding your family’s finances. This type of insurance ensures that you have a source of income when you are unable to work due to illness or injury, helping you maintain your financial stability and your monthly mortgage payments. Income protection insurance also provides you with flexibility, allowing you to choose the benefit amount, waiting (deferred) period, and policy term that suits you. The payments you receive from an Insurance Protection policy are also usually tax-free. This makes these policies a highly efficient way to replace lost income.

Whilst income protection insurance can be very helpful, it is always important to choose the right policy that aligns with your financial needs and circumstances, such as your health history and lifestyle. If you have any confusion or concerns, please reach out to our Specialist Team at Visionary Finance on +44 (0)1908 465 100 to assist you. We have access to numerous insurers on our panel, and we will do the market research for you. We’ll find you the most affordable policy with the best acceptance terms based on your circumstances. Our goal is always to source you a policy which pays you when you need it most.