Dentist Rajpreet Drills Into Income Protection
Find out why dentist Rajpreet turned to Income Protection Insurance to safeguard his financial future...
Looking for insurance to protect your income? You’re in the right place. Sick Pay Insurance aims to provide you with financial support if you ever need to take time off work because of your health.
We’ve written this guide to help you understand how this particular type of insurance works, your policy options, and how much it costs each month.
Sick Pay Insurance, also known as Accident and Sickness Insurance, or Income Protection, covers a percentage of your regular income if you’re unable to work because of illness or injury.
It ensures you can cover your essential monthly outgoings, such as your mortgage repayments or rent, utility bills, and groceries. A policy can:
If you need to take some time off work to recover from an illness, you may experience a significant loss of income. Worrying about money is often distressing, especially if you’re the breadwinner in your household.
With a Sick Pay Insurance policy, you get peace of mind, knowing that should you be unable to work due to accident or sickness, you will still be able to cover your monthly outgoings.
Sick Pay Insurance protects your income, which makes it one of the most important forms of protection you can consider. After all, it’s your income which pays for everything in life that we need.
Alex Weir
Independent Health & Protection Expert
After comparing Sick Pay Insurance policies and finding the right insurer for your circumstances, you’ll choose from a variety of policy options, such as a deferred period and length of the payout period. What you choose will build out your policy, and affect how much you pay.
When the policy is live, you pay a monthly premium. If you’re unwell and need to make a claim, you’ll only begin receiving your monthly benefit once your set deferred period ends. Your benefit will continue to payout until you’re well enough to return to work, reach the policy cease age, or enter retirement.
Below you’ll find an explanation of the different policy factors that affect your policy coverage and monthly premium.
This is the length of time your policy is active. The majority of Sick Pay insurers offer cease ages up to 70, but it depends on the insurer.
You will choose an end date for your policy (the policy cease age). We suggest aligning this with the age you’re expected to retire to ensure you’re protected right up until retirement. After this date, it’s typically common for people to have other means of income, such as their pension.
The level of cover refers to the sum you’ll receive each month. Most insurers allow you to protect up to 70% of your gross income, although, it does depend on the insurer. How much cover you need should be considered carefully. If you were out of work because of sickness, how much money would you need to cover your essential monthly outgoings?
EXPERT TIP 🤓
Work out how much your average outgoings are and align the coverage to that sum. Don’t opt for the maximum benefit if you don’t need it, as this increases premiums.
The payout period is how long you’ll receive your monthly benefit if you’re off work.
Choose between Short-Term Sick Pay, which typically only pays out for up to 2 or 5 years per claim. Or a long-term policy, that pays out for as long as possible. This is often up until your policy cease age. Our expert advisers recommend long-term cover, as it’s more comprehensive. However, it costs more than short-term policies.
Your set deferred period is how long you can survive on other financial means before your policy pays out. Some insurers refer to it as a waiting period.
Many UK insurers have deferred periods as short as one day and as long as 52 weeks. Align this with any company sick pay or other funds you have. This way if your company sick pay ends, for instance, you have a policy to protect you.
Index-linking your policy ensure your benefit amount remains in line with inflation throughout the policy’s lifetime. This option means your benefit has the same purchasing power 20 years’ later as it did current day.
Without indexation, it’s likely your current benefit amount will not be worth the same monetary sum in the future. This could impact your affordability for living expenses and bills if you had to rely on the policy for the long term.
There are some insurance providers offering Accident, Sickness & Unemployment (ASU) policies. Alongside protecting your income against accident or sickness, you’ll also be protected against unemployment. Such plans won’t cover unemployment for reasons of your own doing, like being fired for misconduct, for example.
The sickness element on these policies tends to be inferior to standard Income Protection. We recommend getting a comprehensive Sick Pay Insurance policy first. If you want to include cover for redundancy, you can then consider separate Unemployment Insurance.
Insurers offer several types of premiums. These are:
Sick Pay Insurance covers you should you develop an illness or suffer an injury that prevents you from working. Your policy will cover for you:
There are several definitions of incapacity used by insurers to determine your incapability to work and your entitlement to benefits. We recommend the own occupation definition to our clients, as it offers the best chances of a successful claim. This definition means the insurer will pay out for anything that medically stops you from doing your own job.
While there are others (Suited and any occupation definitions), we avoid these as they can affect whether your claim is paid. Other definitions make it harder for you to claim, as insurers could deem you fit for another role despite your health.
Alongside your core Sick Pay cover, most of the UK’s Sick Pay Insurance providers offer a great range of extra benefits. These aim to support your health and wellbeing. You can use them without having to make a claim. And the best bit? Most of these additional benefits are free to use.
You may find these kinds of services included with your policy:
Not only are these often free, your immediate family members, such as your spouse or civil partner, and dependent children, can also use them.
Just like other insurance products, Sick Pay Insurance has a few exclusions. These apply to all policyholders, regardless of their situation.
Your policy will not pay out for accidents or sickness caused by:
It will also not cover:
During setup of your Sick Pay Insurance, you’ll be asked to declare any pre-existing medical conditions you have, or have suffered from in the past. Whether these are covered depends on the insurer.
Each Sick Pay cover provider has their own view of covering a pre-existing medical condition. They may:
If you’re worried about how an existing health condition may affect your policy, it’s best to discuss your options with an expert.
Our team of advisers has direct access to the underwriters at the top UK insurers. We can help you get the best possible terms for your situation. Call us on 02084327333 or email help@drewberry.co.uk.
Sophie Guiver
Independent Protection Expert
Whether you need Sick Pay Insurance comes down to your personal circumstances. To identify if Sick Pay Insurance is the right option for you, consider:
The risk of having to take time off work because of an accident or serious illness is much higher than people think. Many adults can’t imagine anything ‘bad’ happening to them, making it easy to assume you don’t need Sick Pay Insurance.
However, it’s important to remember that an unfortunate event that prevents you from working can occur at any time, to anyone. When considering Sick Pay Insurance, consider the facts:
These statistics go to show the large number of UK adults unable to work due to long-term health problems. And that no one is immune; those aged as young as 16 are tackling multiple conditions at the same time.
Sick Pay Insurance isn’t the only way to protect your lost earnings if you become too unwell to work. Some have enough savings to fall back on in times of need. However, very few UK working adults are in a position to save for emergencies.
In a recent Drewberry survey, we found 1 in 5 working adults would not be able to survive for longer than a week on their savings. A third of adults either have no savings or less than £1,000.
Considering the average UK household spent around £528 a week in 2022, a large proportion of people have less than 2 weeks’ worth of cash to cover their backs. This sum is likely to have increased since 2022 because of the rise in cost of living.
While there are a handful of employers offering full sick pay for a specified period, this luxury isn’t afforded to everyone. You may only be entitled to Statutory Sick Pay (SSP), which pays £109.40 a week for up to 28 weeks.
If you’re self-employed or don’t meet the threshold for Statutory Sick Pay, you won’t be entitled to it. In this situation, you’d rely on Employment and Support Allowance (ESA). This benefit provides up to £84.80 a week if you’re aged 25 or above.
There are several state benefits available to those unable to work because of sickness. However, your eligibility depends on your condition and your circumstances. Even when government benefits are combined, the total sum rarely covers what a household would typically spend in a month.
Remember that average weekly spend for UK households? £109.40 is unlikely to be enough to cover your essential living expenses.
This is why Sick Pay Insurance is such a valuable form of protection, as it ensures you can cover your monthly outgoings.
Ben Brooks
Independent Health & Protection Expert
Many self-employed people come to us wanting to protect their income should they unexpectedly be unable to work. The nature of self employment means it’s unlikely you’re entitled to any form of sick pay from a traditional employer, such as Statutory Sick Pay.
In the event of sickness, insurance can prove to be invaluable in times of need. If you work for yourself, taking time off likely means your revenue streams stop. Self-Employed Sick Pay Insurance can cover this loss of income if you fall ill and can’t work. It’s a hugely important lifeline for many people,
It’s why self-employed people, like Mrs Mummypenny, buy Sick Pay Insurance, as it offers financial security and peace of mind.
The cost of Sick Pay Insurance depends on a variety of factors. Some you can’t control, like your age. While other policy options you can adjust to reduce costs. Insurers will take into account your age, medical history, and what you do for work, for example.
Using our Income Protection online quote tool, we’ve got some cost examples for you. These show how different factors can affect the cost of your policy.
Each Sick Pay cover provider will charge a different monthly premium. This is because each insurer has its own appetite for risk and can offer different services and benefits. So it’s always good to shop around when looking for the most suitable cover.
To show you the cost differences, these quotes assume:
Different Providers | |
|---|---|
£29.32 a month | £39.28 a month |
The older you are at the start of your policy, the higher your premiums. This is due to the increased risk of sickness or injury as you age.
Below are some cost examples for policyholders of different ages. These are based on the same criteria above (except for the age changing).
| Age | Monthly Premium |
|---|---|
| 25-year-old | £19.79 |
| 35-year-old | £29.32 |
| 45-year-old | £46.21 |
Smokers are more at risk of developing a health condition. Some insurers will increase your premiums if you smoke, others won’t.
Here’s an example of the difference in monthly cost between a policy for a non smoker and a smoker. This is based on the above policy options for a 35-year-old.
| 🚭 | 🚬 |
|---|---|
| £30.42 | £42.53 |
Insurers typically offer deferred periods of 4, 8, 13, 26, or 52 weeks. The longer this period, the cheaper your premiums because insurers don’t have to pay out immediately.
Here are some cost examples of policies with different deferred periods. These are based on the previously used policy options above.
| Deferred Period | Monthly Premium |
|---|---|
| 4 weeks | £41.59 |
| 8 weeks | £37.58 |
| 13 weeks | £23.72 |
Some jobs are riskier than others, with higher chances of workplace injuries. Those in manual labour roles, working at heights or with heavy machinery, for example. Compared to an office worker, the insurer faces more risk providing cover to a construction worker.
We’ve got some examples of Sick Pay Insurance costs for different job roles.
| Occupation | Monthly Premium |
|---|---|
| Domestic plumber | £55.35 |
| Shop cashier | £41.67 |
| Salon hairdresser | £43.40 |
It’s common for people to choose an insurer based on the likelihood of a successful claim. And it makes sense to think about it this way if you’re worried about claiming.
However, it’s often difficult to differentiate one provider from another in terms of payout rates. Typically, payout rates across the industry are higher than most think and also fairly uniform.
When looking at an insurer’s payout rates, it’s best to consider these as a guide. While you want to ensure a claim is successful, it’s important for your policy to suit your needs and requirements.
In this table, you can see the rates at which insurers have successfully paid out for Sick Pay Insurance claims over the last few years.
Insurer | 2020 | 2021 | 2022 |
|---|---|---|---|
Zurich | 85% | 99% | 85% |
Vitality | 96.8% | N/A | 96.5% |
Shepherds Friendly | N/A | 95% | 96.2% |
Cirencester Friendly | 94% | 93.6% | 95.4% |
Holloway Friendly | 98% | 94% | 93.4% |
British Friendly | 87% | 84% | 90% |
Liverpool Victoria | 95% | 93% | 92% |
The Exeter | 91% | 93% | 92% |
Aviva | 87.5% | 85.4% | 94.3% |
Legal & General | 93% | 81% | 82.2% |
If you’re a director, you can get Company Director Income Protection. This is paid for and owned by the business.
When claiming, the insurer pays the benefit into your business account for you to distribute in a tax-efficient manner.
This policy differs from a Sick Pay plan, so it’s important to seek advice. Call us on 02084327333 or email help@drewberry.co.uk.
Danny Gill
Independent Protection Expert
No. Sick Pay Insurance is designed to pay out a monthly income if you’re unable to work because of an accident or illness. It doesn’t include unemployment cover, unless you add it as a ‘bolt on’ feature. There are some UK insurers who offer this, but not every provider does.
If you want to cover unemployment, it’s best to get expert advice. You don’t want to confuse Unemployment Insurance with a Payment Protection policy (PPI), which is an inferior product compared to forms of sickness insurance. Our team of expert advisers can help you find the right type of policy for your needs.
As you’re buying the policy for yourself, the monthly premiums are deducted from your net income. This means any payment you receive from your policy is tax free.
The taxation rules only change if you buy a policy through your limited company as a business. Or if you’re an employer offering a Group Income Protection scheme to your staff.
Sick pay is what you will receive from an employer if you have to take time off work due to ill health. Some companies have their own sick pay policy, offering staff a certain period of full pay (6 months, for example). Once this ends, or if your employer doesn’t offer sick pay, you’ll be placed on Statutory Sick Pay.
Whereas Sick Pay Insurance is designed to cover a percentage of your monthly income if you’re unable to work. This differs from sick pay, as it’s an insurance policy you pay for. It helps to provide a financial safety net should you not receive any sick pay or the amount you’re entitled to isn’t sufficient.
As every client who comes to us is different, the best Sick Pay Insurance provider for you is specific to your needs. You might not need the same coverage as a friend or colleague, for example. Policies are tailored to your requirements.
That said, one provider may be better suited to you than another. Every provider is different, too, so it’s about matching your needs with an insurer who will address your needs and provide the right cover.
At Drewberry, we work with a range of UK Sick Pay Insurance providers, including:
It’s important to compare quotes to ensure you get the most competitive Sick Pay Insurance for your circumstances.
Our online quote comparison tool will do the hard work for you. Or if you need some help to compare providers, get in touch with us. Our team of expert advisers is on hand to offer advice on the right policy for you. Call us on 02084327333 or email help@drewberry.co.uk.
Given there is a lot to consider when buying Sick Pay Insurance, especially if you’re self-employed, speaking to an expert is highly recommended. We provide fee-free, impartial advice and recommendations to help you make an informed decision on the best policy for you.
If you need some help to compare providers or advice on choosing the right one, get in touch. You can call us on 02084327333 or email help@drewberry.co.uk.
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.