What’s best: income protection or disposable income?

When you are doing well financially it can feel like it will last forever. The last thing on your mind is looking on the dark side when you could have a new sofa or upgrade your car. But would happen if your income was suddenly much lower? Every year one million people in the UK find themselves unable to work due to a serious illness or injury according to an ABI survey in 2017. In this situation;

  • What would happen to your family?
  • Would your savings support you?
  • What sick pay would you be entitled to from your employer?

You would need some other way to keep paying the bills.

Income protection insurance is designed to provide you with cover if you can’t earn an income for those reasons. It is also known as permanent health insurance which is why It’s different to critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness. The people most likely to need income protection insurance are those who couldn’t rely on a partner bringing in enough income to cover the bills, or who wouldn’t qualify for state benefits.

It becomes particularly important if you are self-employed or in a job where you don’t have sick pay to fall back on. Income protection insurance generally starts after a period, sometimes as little as four weeks, although some policies won’t start paying until your sick pay runs out. Here are a few key benefits:

  • It pays out until you can start work again, or until you retire, die or the end of the policy term, whichever is soonest.
  • It should cover most illnesses or disabilities depending on the type of policy and its definition of incapacity.
  • You can usually claim as many times as you need for as long as the policy lasts.  The cost of a policy will vary depending on things like your age, your current job, if you are a smoker, and your overall health, weight and family medical history.
  • You can specify the range of injuries and illnesses it covers, and the length of time you wait before the policy activates. These all help to keep the cost down, but you do need to remember that you need an adequate level of cover for your personal circumstances.

When looking at income protection insurance it is best to seek advice about the different policies available, as there are some that only cover you for a short term for instance. It is worth taking time to investigate the options available, you may be covered by your employer. Get in touch to discuss your specific circumstances.



Payment Protection Insurance is optional.  There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.


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