Answered by Tom Conner
It is sometimes the case that Income Protection Insurance is referred to as Sick Pay Insurance.
This type of cover is designed to payout a monthly benefit to cover lost earnings when someone has to take time off work due to illness or injury.
Information for individuals
Many workers in the UK are not entitled to receive sick pay from their employers over and above Statutory Sick Pay (SSP). This means that employers need only pay £92.05 per week for up to 28 weeks.
As a result, income protection is a popular type of cover for people who would not receive full sick pay from their employer. The self-employed are also particularly keen on income protection.
Income protection is even popular with those who do receive a period of sick pay because many companies only pay a very short period of sick pay, which ranges from just a few weeks with some firms up to 12 months with others.
Income protection can payout all the way up until retirement if the policyholder is unable to return to work so it provides vital cover for more serious illnesses or injuries and the plan can be aligned so that it kicks-in when sick pay ends.
Information for businesses
With the emergence of shorter payout period policies some companies have decided to insure a proportion of their potential sick pay liability with Group Income Protection (GIP), thus providing more certainty around costing.
Classed as an employee benefit, GIP is a policy taken out by businesses and pays out a monthly benefit to the business if an employee has to take time off work due to illness or injury. Those moneys are then paid to the employee. The lowest cost option is for the policy to payout for a maximum period of two years.
There are even plans in the market that could pay an additional amount to the company for ‘associated business costs’, such as for recruiting and training a replacement.
For more information please visit our ‘Guide to Sick Pay Insurance‘.
Frequently Asked Income Protection Insurance Questions
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