Short Term Income Protection Insurance

What is short-term income protection insurance?

Short-term income protection insurance is designed to cover you if you are unable to work for a fixed amount of time, usually for 6 months to a year. However, the time frame can vary depending on your income protection policy.

Short-term income protection insurance is a good alternative to full income protection if you do not want to pay for, or are unable to afford, long term cover. Arranging cover to protect your income in the short-term is always preferable to having no cover in place at all. It’s also possible to review your insurance over the years and switch to a full income protection policy should your circumstances change.

Who is short term income protection for?

Short-term income protection insurance is designed for those who want to safeguard their income against temporary illness or injury that prevents them from working. It’s particularly suitable for those who are self-employed and employees who are not entitled to sickness benefits. Short-term income protection typically covers a fixed percentage of your income for a set period, such as 12 months, making it an effective way to manage income during unforeseen health-related absences.

How does short-term income protection work?

Short-term income protection insurance pays you an agreed monthly amount to help cover living expenses and financial commitments whilst you are not earning a salary. The duration you’ll receive a payout typically stops once you return to work or the maximum payment period is reached, which will be set out in your policy.

The deferred period (also known as waiting period) before the payments start varies by policy and can be chosen by you at the time of purchase. Shorter deferred periods generally increase the premium cost.

What affects my short-term income protection policy?

Several factors can influence the specifics of your short-term income protection policy, including the cost of premiums and the level of coverage you receive. For example:

• Your occupation: High-risk professions may attract higher premiums due to the increased likelihood of work-related injuries or illnesses.
• Your health and lifestyle: Personal health conditions and lifestyle choices, such as smoking or engaging in extreme sports, can impact your policy terms.
• Age: Typically, the older you are, the higher your premium might be.
• Income level: Higher coverage amounts for higher salaries usually means higher premiums.
• Length of coverage: The duration you choose for your policy to pay out affects its cost.
• Waiting period: Choosing a longer deferred period (also known as waiting period) before you receive your payout, can reduce your premiums.

Do I need short-term income protection?

You might consider buying short-term income protection insurance if you’ve got essential outgoings, such as rent or a mortgage, and you fall in one of these categories:

• You are self-employed: As you won’t have access to employer-sponsored sick pay or benefits.
• You don’t have sick pay or redundancy benefits: if your employer does not provide financial safety nets
• You can’t rely on savings: If your savings aren't sufficient to cover your living expenses in the eventuality you were unable to work, short-term income protection could ensure you are covered

What does short-term income protection cover?

Normally, short-term income protection insurers will cover a percentage of your monthly pay, or, alternatively, your mortgage payments or any debt repayments you may have.

Coverage can vary significantly between policies. However, the flexibility of short-term income protection insurance means that you are not strictly required to cover 50-70% of your income. Instead, you can tailor the coverage to meet specific financial obligations, such as mortgage payments or debt repayments. This ability to customise your policy allows you to align your policy with your most pressing needs, offering peace of mind that your significant financial commitments can be met even if you're unable to earn your usual salary temporarily.

If, for example, you were to have an accident whilst at home and were unable to work for eight months, causing you to apply for statutory sick pay, then a short-term income protection policy could help you cover the difference between your outgoings and reduced income.

What doesn’t short-term income protection cover?

There are a number of situations that short-term protection insurance doesn’t cover.

These include:

• Self-inflicted injuries
• Some illnesses – check the list in your policy
• Pre-existing conditions (illnesses you know about already)
• An accident or sickness resulting from drug or alcohol abuse
• Voluntary redundancy, seasonal unemployment, and early retirement
• Redundancy, if you knew it was possible or likely when you took out the policy.

As the name implies, short-term income protection helps you bridge the gap until you’re able to work again but not if you will be unable to return to work for a very long time, if at all.

ActiveQuote can help you find short-term and long-term income protection, depending on which suits you better. It’s also important to remember that terminal illness cover is available on many life insurance policies.

Are there different types of short-term protection cover?

There will normally be three types of cover you can choose from: accident and sickness only; unemployment only; or accident, sickness and unemployment cover.

If you only have unemployment cover your insurer will pay out if you’re unable to work due to being made redundant, but not if you can’t work because you’re ill or have had an accident. Similarly, accident and sickness cover would only cover you in those circumstances, and not if you were to lose your job for another reason.

How much does short-term income protection cost?

Short-term income protection is typically cheaper than long term policies so if you can afford it, you might want to choose a policy with a longer benefit period. Short-term cover is a great way to protect your income if you are considering self-employment for the first time, for example, or until your business starts making more money.

The cost of short-term income protection depends on many factors, including:

• Your age
• The length of the benefit period (how long the policy will pay out for)
• The length of the deferred period (also known as waiting period)
• The cover you choose (in other words whether you opt for accident and sickness cover, or redundancy cover, or both).

Some insurers also offer different terms for certain occupations, so if the cost of one policy seems to differ greatly to another then double check which occupation class is being offered. Remember, the cheapest cover is not always the best value for your needs. Speak to one of our advisors to get the best income protection policy for your needs and avoid getting caught up in the fineprint.

Short term income protection FAQs

How long does short-term income protection last?

Short-term income protection insurance typically offers coverage for a fixed period, between six months to one year. The specific term length can often be chosen based on your personal needs and financial situation, giving you flexibility in how long you wish to be covered under the policy.

How much of my income will it cover?

Short-term income protection insurance generally covers a percentage of your monthly income, typically ranging between 50% to 70% of your gross salary, tax-free. The exact amount of income covered can vary depending on the policy terms and your individual circumstances, allowing you to choose a level of coverage that best fits your financial needs and lifestyle.

How do I buy short-term income protection cover?

There are many short-term income protection insurance policies on the market. Before you buy it’s important to compare short-term income protection insurance quotes to make sure you are getting the right cover for you, at the best price.

With ActiveQuote, it’s easy to compare short-term income protection insurance quotes online from across the UK to find the best short-term income protection cover for you at an affordable price.