Disability Insurance provides you with a monthly income should you suffer either a short or long term disability which renders you unable to work.
It will pay out a monthly benefit to replace your lost income due to any illness or injury which prevents you from earning your income.
It allows you to keep up with all your essential monthly expenditure – everything from bills and groceries to rent and mortgage payments so you can focus on your recovery.
According to consumer group Which?, Income Protection is the one policy every working adult should consider.
Disability Insurance is more commonly known as Income Protection in the UK.
You take out a policy to cover a proportion of your earnings and should at any point you suffer an accident or sickness which renders you unable to undertake the day-to-day duties of your job the insurance will pay you monthly benefit to replace your lost income.
The disability might come as a result of an illness or bodily injury. As long as the disability prevents you from working, you should be able to make a claim.
The best cover will protect you in your own occupation, meaning as long as you’re incapable of doing your specific job role you’ll be covered.
Income Protection tends to have very few exclusions as standard, although those you may encounter tend to include:
It is designed to protect your income against most disabilities that prevent you from working however if you have pre-existing medical conditions this can complicate the situation.
At the application stage, you’ll be asked a series of medical questions about your current health. If you declare any conditions from the past 5 years the insurer will review your disclosure in more detail and likely do one of three things:
However, if a condition is excluded with certain insurers there may be an opportunity for you to serve a set period on the policy without receiving any advice, medication or treatment for that condition and have it reassessed and potentially covered. This will be entirely at the insurer’s discretion.
We have direct access to the underwriters at all the top UK insurers and so are best placed to get you the best possible terms. If you have existing health conditions and need some help please do not hesitate to pop us a call on 02084327333 or email firstname.lastname@example.org.
The risk of a disability tends to be a lot higher than most people would think. For instance, 1 in 6 working adults aged 55+ said they’d needed at least 6 months off work due to illness or injury at some point during their careers.
The length of time they required off work clearly goes beyond your usual coughs, colds and broken arms or legs and into more serious illnesses and injuries – disabilities that keep you off work for months at a time.
Meanwhile, there are more than 2 million people statisticians label as ‘economically inactive’ (i.e. not seeking work) due to long-term disability in the 3 months to January 2019.
If you ended up out of work long-term as a result of a disability, how would you cope financially?
Many people would struggle if their intent was to rely on savings, with 2 in 5 of us having no more than £1,000 in cash stashed away for a rainy day. That’s enough to maintain average household expenditure of in excess of £500 per week for less than a fortnight if the going got tough and you couldn’t work.
Meanwhile, state benefits aren’t as generous as many people assume they are.
The main government disability benefit is Employment and Support Allowance, which starts at just £73.10 per week if you’re over 25.
You may get more depending on how serious your disability is and you may also be entitled to other state benefits, although again this depends on the nature of your disability and how it impacts your daily life.
Rarely are such benefits enough to make up ‘normal’ household expenditure if you become disabled through illness or injury and can no longer work.
There are four major policy factors that will determine the cost of cover:
When you take out a policy you have three options to pay for cover. These premiums will impact the cost of your Disability Insurance over time, so it’s important to consider each carefully to decide which is right for you.
There are three definitions of incapacity to consider when taking out cover. Each one will impact whether you can claim, determining the level of disability you need to suffer before you can receive benefits.
Arguably the best definition of incapacity, this will allow you to make a claim if you’re unable to do your specific job due to a disability.
So, for instance, a surgeon with a hand injury wouldn’t be able to perform surgeries and so would generally be able to make an Income Protection claim due to disability.
Suited occupation Income Protection means you’ll only be able to make a successful claim if you become so incapacitated you can’t perform your job or any other that you have the skills and experience to perform.
This may mean a surgeon with a hand injury couldn’t perform surgeries but could face not being able to make a successful claim because they have the skills and experience to teach medicine, for instance.
This is the most difficult definition of incapacity to claim on and in general we recommend most clients avoid it.
It means you can only make a successful Income Protection Insurance claim if you become so disabled you cannot work in any job / perform a set number of tasks required by most professions, such as typing or signing your name.
The income that you receive when claiming on your policy depends on your salary before you took leave. You are typically able to insure up to 70% of your gross monthly earnings (the sum before income tax is deducted) and the policy can last all the way up until your planned retirement.
You can claim as many times as you need to for as long as you need to on your policy while it’s still active.
This means if you’re unfortunate enough to suffer multiple illnesses or injuries throughout your working life that each stop you from doing your job, you’ll be able to claim repeatedly.
Independent Protection Expert at Drewberry
Neil is a client of Drewberry’s and we matched him with British Friendly for his Income Protection Insurance. He’d held the policy for just 4 years before unfortunately needing to make a claim.
After a bout of stomach pains took him to his GP, and his GP sent him off for further tests, Neil got the terrible news that he had stage 2 bowel cancer and needed surgery.
While the surgery was a success, Neil contracted post-operative sepsis and needed several weeks of hospital care. During this time, and his subsequent recovery at home, he was completely unable to work.
British Friendly paid a claim all the while Neil was unable to work, allowing him to keep up with all of his important bills, including his mortgage.
The below table contains five examples of claims from Income Protection clients who have all needed to claim on their policy.
The information is from Liverpool Victoria’s claims history, it demonstrates how anyone can lose their income, regardless of age, gender or occupation, LV’s youngest claimant was just 22 years old.
|Age at Claim||Occupation||Length of Claim (Ongoing)||Total Payout to Date|
|31||Carpet fitter||15 years||
|48||Estate agent||14 years||
The cost of will vary depending on the details of your policy and your personal situation. Fortunately, our advisers know all the tricks of the trade to get you comprehensive cover while keeping premiums as low as possible.
The healthier you are, the lower your premiums will likely be. A big determining factor for the insurer when it comes to your overall health is your current age. This is because, as we get older, we are more susceptible to health problems and therefore more likely to make a claim.
Another detail about your health that plays an important role in the pricing of your policy is your smoker status.
Smokers have a much higher risk of serious illness than those who don’t smoke, which is why smokers can sometimes pay double the premiums of non-smokers for the same level of cover.
If you can go a full year without smoking and prove it by passing a cotinine test, you could benefit from lower premiums.
Finally, your medical history will play a role in your policy’s pricing. Insurers will likely to want to know about any recent and / or serious health conditions that you have suffered from.
They may look to increase the cost of cover to reflect the greater risk or simply exclude that condition entirely.
Risky occupations may limit the definitions of incapacity available to you, but they can also affect your premiums.
If your occupation puts you at heightened risk of injury or illness, such as working at heights, then your insurer will usually increase the cost of your Disability Insurance policy.
The base premium for a professional who work sat a desk all day will usually be cheaper than for manual workers because the job is less risky and involves a lower chance of injuring yourself on a daily basis. Also, there are more conditions that could stop you working in a manual role than in a desk-based role.
In the below table, we’ve calculated the average monthly cost of Disability Insurance.
To work out the cost of cover, we’ve assumed:
The Income Protection quotes we have calculated were from our online quote engine and represent the cheapest policy that matches the above criteria from across the entire UK market.
The most common alternative to Disability Insurance that people consider is Critical Illness Insurance. While Disability Cover will pay out a monthly income which aligns with your expenditure, Critical Illness Cover will pay out one large lump sum on a claim.
It can be tempting to opt for Critical Illness Insurance but there are a fair few reasons why Disability Insurance can be a better option to rely on if you are unable to work.
Aviva covers all policyholders with an own occupation definition of incapacity and, if you choose to return to work in a different occupation until you are well enough to return to your pre-incapacity occupation, Aviva will top up your reduced income with Back to Work Benefits.
British Friendly gives access to its Mutual Benefits program, which provides rewards such as vouchers for high street shops, discounted fitness tracking devices, emotional support services and online legal services.
Cirencester Friendly provides you with a range of additional benefits and services, including a hospitalisation benefit and a Friendly Voice service that provides you with a personal nurse that you can contact for advice and emotional support.
The Exeter is one of the few UK insurers that is able to offer own occupation cover to workers in higher risk occupations, although such policies only offer age banded premiums.
Legal & General comes with a free life cover element that pays out a maximum of 12 times your monthly benefit if you pass away while the policy is in force.
Liverpool Victoria offers free access to unique LV Doctor Services, which include fast access to remote GP services, second opinion services and private prescriptions for policyholders and their children up to the age of 16.
Royal London can include Fracture Cover, which pays out a lump sum of between £1,500 and £4,000 on top of any benefit you’d receive for being off work if you receive a fracture of a specified body part
Shepherds Friendly allows you to apply to suspend cover and premium payments under your plan for a minimum continuous period of 3 months and up to a maximum continuous period of 24 months. This is known as ‘Career Break’ option.
Vitality provides a unique offering. While the core of its policy is similar to other providers’ offering, it also offers a unique set of additional benefits to those who participate in the Wellness / Optimiser programs that can include policy discounts and rewards.
With so much to consider when it comes to setting up Income Protection, it’s important that you don’t miss anything out. That’s where the advice of an expert such as one of the team at Drewberry can be invaluable.
We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.
Taking out Disability Insurance can end up a little confusing especially with the many pitfalls to avoid.
If you need any help please do not hesitate to pop us a call on 02084327333 or email email@example.com.
Director at Drewberry
Martyn Coates from Drewberry provided an excellent service with prompt handling of any question that we asked him. I would highly recommend Drewberry for anyone wanting Insurance.