How Can I Cover My Income if I Became Sick or Injured?

What insurance can cover my salary if I suffered sickness or had an accident? I do get some sick pay from work but this only lasts for 3 months and I don’t know what I would do if I was off work for a year or longer. Is there a type of insurance that can protect earnings?

Yes, when looking to protect your income against the risk of illness or injury there are two main policy types for you to choose from. Both plans would pay out a monthly benefit to replace a proportion of your income should you have to take time off work due to incapacity.

What is Long Term Income Protection?

Also known as Permanent Health Insurance, this type of policy can cover your salary for both short-term and long-term illness and injury.

With an own occupation definition of incapacity these plans are very comprehensive, paying out for practically any medical complaint that prevents you from working in your own job.

One of the major benefits of this plan is that it could pay out until retirement age if you are unable to return to work. In other words, the plan would continue to pay out a monthly benefit either until you are well enough to return to work or you reach the end of the policy life (typically state retirement age).

What is Accident and Sickness Insurance?

This type of plan is similar to long-term income protection apart from it can usually only payout for a maximum consecutive period of 12 months.

Accident & Sickness plans are also less comprehensive than Income Protection, being particularly weak when it comes to back, mental health and chronic medical conditions. These plans would also usually only cover you in a ‘suited’ rather than ‘own’ occupation definition.

Accident & Sickness Cover usually represents a cover of last resort if Income Protection is not affordable or appropriate.

It is worth noting that some insurers now offer an alternative in the form of a reduced payment term Income Protection plan. These offer the same comprehensive cover as Income Protection but with a maximum payout period of either 1, 2 or 5 years per condition per claim, which naturally lowers the premiums.