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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 six months to a year.
This may be suitable for people who are made redundant, or those who suffer an injury such as a broken arm or leg, which would leave them unable to work or earn their usual monthly wage for a period of time.
Because it pays out for a shorter period than full income protection, the premiums are considerably cheaper.
How does short-term income protection work?
Short-term income protection insurance pays you an agreed monthly amount during a short period (usually 12 months) when you can’t work because of an accident, sickness, or redundancy.
When you make a claim, you have to wait a set number of days before you start to receive a monthly payment. The payments continue until you go back to work, or – if you don’t return to work – for a maximum period (typically one or two years).
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 is also possible to review your insurance over the years and switch to a full income protection policy should your circumstances change.
What does short-term income protection cover?
Normally, income protection insurers will cover a percentage of your monthly pay, or, alternatively, your mortgage payments or any debt repayments you may have.
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 to cover the difference between your outgoings and reduced income.
Short-term income protection covers you against being unable to do your own job (the most comprehensive and easily claimed cover), being unable to do any job, or being unable to complete a list of tasks such as walking, bending, or lifting. What you are able to claim for will depend on thew policy you take out.
Essentially, short-term income protection cover can help you in circumstances where you're temporarily out of employment, but it won’t be adequate if you fall seriously, or terminally, ill.
What doesn’t short-term income protection cover?
There are a number of situations that short-term protection insurance doesn’t cover.
- 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
- for a period of time – normally 30 days – after you stop working and before your payments start. You’ll need to be able to manage yourself during this period (or choose a policy that starts paying from day one of you being off work).
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 and/or critical illness cover, depending on which suits you better. It’s also important to remember that terminal illness cover is available on many life insurance policies.
Do I need short-term income protection insurance?
You might consider buying short-term income protection insurance if you’ve got essential outgoings, such as rent or a mortgage, and:
- you’re self-employed
- you don’t have sick-pay, redundancy pay or employee benefits to fall back on
- you can’t rely on savings to see you through a period of sickness or unemployment.
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 waiting period (the period of time before your payments kick in)
- 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.
The cost of short-term income protection insurance is also reduced the longer the deferred period is on a policy - that is, the length of time you are able to wait before a claim is paid. Cover can then kick in when either sickness benefits or any savings you have are no longer able to support you.
Short-term income protection insurance can be set to pay out from just a few weeks up to 12 months of being unable to work. The longer the deferment period is, the cheaper your premiums will be.
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 is 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 is easy to compare short-term income protection insurance quotes online from across the UK to find the best short-term income protection cover at an affordable price.