Income Protection

Income Protection is designed to cover you against an accident or ill health and distinct from Critical Illness as it pays you an income rather than a lump sum.

Benefit

There is a maximum benefit which will vary from one insurer to another but is normally around 75% of gross income. The benefit is normally paid monthly to the policyholder after a set deferred period and is not taxable. This type of policy is pure protection insurance so there is no cash in value at any time.

Deferred Period

The deferred period is the waiting time between the start of inability to work and commencement of payment of the benefit. It will normally be 8, 13, 26 or 52 weeks and most people will match this to how long they are paid by their employer in the event of incapacity. Self-employed individuals will normally opt for a short deferred period as income quite often stops immediately. The longer the deferred period the lower the monthly or annual premium will be.

Term

The benefit will normally be paid out until the sooner of return to work, death or reaching an age specified at outset. Normally people will choose a policy term that runs until their chosen retirement age, although insuring until an earlier age will reduce the monthly or annual premium paid.

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