Can I get Loss of Earnings Insurance?

I’ve heard from my friends about loss of earnings insurance. How does this work? Will it really cover all of my income if I can’t work, and when will loss of earnings cover pay out?

Question asked by Mr M Abboud
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Answered by Michael Englefield

What is loss of earnings insurance?

Loss of earnings insurance is another name for Income Protection. It covers your core monthly outgoings if you can’t work due to a specific set of circumstances, which will vary depending on the type of insurance cover you choose.

What is loss of earnings insurance?

What does loss of earnings insurance cover?

This depends on the type of policy you take out. There are two main types of loss of earnings insurance:

  • Accident and sickness cover – this covers you if you’re medically incapable of doing your job as a result of an accident, injury or illness
  • Accident, sickness and unemployment insurance (ASU) – as well cover for accident and sickness, ASU insurance covers you if you lose your job through no fault of your own, such as forced redundancy.

Note that the unemployment element of ASU insurance plans won’t pay out if you take voluntary redundancy, a career break or are sacked for due cause, such as misconduct or fraud.

Make sure you get own occupation cover when buying loss of earnings insurance. This is the best Income Protection available and will covers you if you’re medically unable to do your specific job.

Inferior definitions of incapacity could see the insurer deeming you fit to work in a lesser job – even at lower pay – and therefore decline your claim.

Kay Mechial
Protection Expert at Drewberry


Can I get loss of earnings insurance if I’m self-employed?

There is a variety of Income Protection for the self-employedcompany directors and contractors available on the market, so being self-employed isn’t a barrier to protecting your income from accident and sickness.

However, it’s important to understand that loss of earnings insurance written on an ASU basis is rarely suitable for the self-employed.

self employed loss of earnings cover

If you are working in this capacity, Drewberry would not recommend an Income Protection policy with unemployment cover.

That’s because to be eligible to make a claim under the unemployment element of loss of earnings insurance, you’d need to prove that you’ve been put out of work due to no fault of your own. That’s difficult if you’re the one in charge.

How much of my income can I cover with Income Protection?

Loss of earnings insurers generally cover between 55% and 70% of your pre-tax earnings, so it’s not possible to cover all of your income.

However, these policies are designed to maintain your essential monthly spending – such as housing costs, utilities, loan repayments and groceries – during a period where you’re unable to work.

Loss of Earnings Insurance
Income Protection
Permanent Health Insurance
Accident & Sickness Insurance
ASU Cover
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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