What is income protection?

Income protection insurance can be offered as a long-term or short-term insurance policy, which is designed to help you if you’re unable to work due to illness or injury.

The policy ensures you are able to continue to receive a regular income until you can return to work, until you retire or until you die.

Short-term income protection

A monthly payment is made for a fixed period of time if you’re unable to work due to an accident or sickness. This is typically 1-5 years. There can be up to three different types of cover which will be available to you on a short-term basis: accident and sickness only; unemployment only; or combination cover - which combines accident, sickness and unemployment cover.

Long-term income protection

Similar to short-term income protection, the long-term policy will cover you if you are unable to work because of illness or accidental injury. The payments will be made to you in a tax-free amount each month, until you are able to return to work or until the policy term expires, whichever is sooner. When signing up to your policy, you are able to select the duration you wish to be paid until, with most opting to be covered until retirement age.

The majority of income protection insurance providers will cover a percentage of your monthly salary, usually between 50-75% of your gross income. Some providers may have options to assist with your mortgage payments and any outstanding debts that are required to be paid throughout the period you are unable to work.

How much will income protection cost me?

As with all insurance policies, they are based on your circumstances. The cost of income protection insurance will depend on the policy you opt for, together with your own personal situation.

As well as the policy type you select, others factors which are taken into consideration are often age; job title; smoking history; the percentage of income you’re looking to cover; your current health; family history and then also the waiting period before the policy pay-out starts.

What happens once an income protection claim is made?

It is important that as soon as you find out you will be out of work for a specific period of time, you call your policy provider. They will require information such as your personal details, your policy details and your reason for claiming (i.e. the nature of your illness and how long you are intended to be out of work for).

When you originally took out your policy, you will have selected a wait period before any payments are made to you. Payments will be made in monthly instalments after this deferred period. It is always important to keep up with your policy premiums, otherwise if you are required to make a claim and any payments have been missed, this may result in an invalidation in your policy which will also affect your claim.

Important factors to consider

Ensure all details you provide are accurate at the time of applying for your policy. Any incorrect or inaccurate information may result in a rejection of your claim or alternatively a lower income if you’re existing income is lower than the amount you declared on the policy.

If your circumstances change, such as a change of job roles or unemployment due to being fired or quitting, you must let your policy provider know.

There is often a waiting period once you make a claim and before you receive any monies from your policy provider. Generally, your payments are set to start after your employer’s sick pay ends, however if you’re self-employed or not entitled to sick pay - it is important to consider this when selecting your wait period.

Income protection does cover a wide range of illnesses and situations, but it is not the same as critical illness cover. Please see here for information on critical illness cover.

If you look to cancel your income protection policy, it is important to review your selected policy provider’s terms and conditions. Often, you have a 30-day window which will enable you to receive a full refund should you wish to cancel your policy. Anything outside of this may result in a loss of funds in comparison to what you have already paid.

Not keeping up with policy premiums may result in a rejected claim or a delay in payment. It is important to keep up with your monthly policy payments.

Guidance on the right product

It is difficult to imagine ourselves in a situation where we are unable to work due to sickness or accidents, however it is important to consider these things can happen at any time.

At ChoiceMortgages, we understand that income protection insurance can be difficult to get your head around, as well as the thought of a new financial commitment. We promise to take time to understand your requirements so we can tailor a package that meets all of your insurance needs, as well as considering existing policies you may already have in place and any employer provisions.

We're here to help

Your local independent experts

  • Unbiased advice with access to the entire mortgage and insurance marketplace
  • We offer a free no obligation consultation over the phone or in person
  • We are open six days a week

Call us on 01780 480600

Speak to an adviser

Istvan Jozsa

Thank you to Nicola and Choice Mortgages. We moved into our first home. It couldn’t happen without Choice Mortgages!

The River Welland running under a bridge in Stamford, Lincolnshire, England

Based in Stamford, Lincolnshire

Choice Mortgages is an independent mortgage broker; having access to thousands of mortgage and protection products on the market. Our office has been located in Stamford for over 20 years and we have a team of professional advisers with a vast amount of experience.

We offer a free no obligation consultation and help you find the most suitable solution. Understanding lenders criteria and how you are eligible for a mortgage is paramount.

We provide a dedicated personal service and work closely with you every step of the way; organising the paperwork and taking care of the entire application process, making the transaction far less stressful for you. We know lives are busy and we can alleviate the time pressure, by offering telephone or face-to-face appointments.

About Choice Mortgages