Income Protection - Frequently Asked Questions
Income protection is designed to replace your income should you be unable to work due to illness, accidental injury or redundancy.
Why should I invest in Income Protection?
Having Income Protection means you will not need to use your savings or rely on state benefits if you are unable to work through sickness or accidental injury. Ask yourself the following questions:
- Would state benefits of up to £101.15 a week* allow me to maintain my current lifestyle?
- Could I live off my partner’s income indefinitely?
- Do I have savings I could live off indefinitely?
If the answer is no to the above, then you should probably consider Income Protection. An Income Protection Policy will provide you with a regular tax free benefit to give you time to get back on your feet after an accident or an illness.
Some Income Protection policies will also replace your income if you are made redundant. There are currently more than 800,000 people in the UK who have been out of work for more than one year following redundancy, according to the Office of National Statistics. An Income Protection policy will give you the financial support you need when looking for a new job.
For how long will Income Protection pay in the event of incapacity?
The benefit period is the length of time that your policy will pay you for if you are unable to work through illness or accidental injury. There are two main types of Income Protection: long term and short term.
Long term Income Protection
Otherwise known as permanent health insurance (PHI), Long Term Income Protection is designed to replace your gross monthly income right up until retirement age should you be unable to work due to illness or injury.
Short term Income Protection
Otherwise known as Accident, Sickness and Unemployment (ASU), short term IP replaces your income for up to 12 months should you be unable to work due to accident, sickness or forced unemployment. Accident, Sickness and Unemployment can be used to cover your general lifestyle costs, or it can be tied to a particular debt.
Do I get any money back if I don’t claim before the end of the policy?
You will not get your money back if you do not claim before the end of your Income Protection policy.
Is my benefit tax-free?
Yes, Income Protection Insurance will pay you a monthly tax free benefit to replace your income.
How much will Income Protection cost me?
The price of Income protection can vary hugely depending on the type of policy you choose. The premiums are calculated based on the amount of cover you require, the length of cover you require, your age, your smoker status, and sometimes even your current health and your occupation.
What exclusions might my Income Protection policy have?
A typical short term Accident, Sickness and Unemployment (ASU) policy will exclude you for the following:
- Dangerous sports or occupations
- Deliberate self-injury
- Any pre-existing medical condition related to stress, back problems or normal pregnancy
- AIDS related conditions
- Conditions due to drug and/or alcohol abuse, or criminal activity
If your policy also includes unemployment cover, you will not be protected if you:
- Knew or had reason to believe you might become unemployed
- If your work is temporary or seasonal, or you accept voluntary unemployment
- Become unemployed within the initial exclusion period.
All long term Income Protection policies will need to be medically underwritten, so pre-existing conditions may be excluded from the cover. A full list of exclusions will be provided with your policy.
Why should I compare Income Protection with ActiveQuote?
At ActiveQuote we understand that choosing an Income Protection policy can be a daunting task. That’s why our online comparison system will compare long and short term IP policies to help you find a quote that suit your needs and your budget. We compare Income Protection policies from all the leading UK insurers, and allow you to change your options online with instant updates to the price.
If you are struggling to decide on an Income Protection policy, an ActiveQuote advisor is always on hand with free, no obligation advice. For more information about us, take a look at our About ActiveQuote page.
* People suffering long term sickness can apply for employment support allowance (ESA) of up to £101.15 a week