What is ‘payment period’ for income protection insurance?

I don’t get sick pay so I want to protect myself with income insurance for accident and sickness but in the quotes it says ‘payment period’, what is that?

Question asked by Andrew Whittle
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Answered by Tom Conner

The ‘payment period’ is the maximum length of time that your policy will pay a monthly benefit should you have to cease working due to illness or injury.

It is important to note that this is for a continuous claim. In other words, it is still possible to make other claims on the plan but it is only possible to claim for up to the maximum payment period in one single claim.

To claim again for the same condition you would usually need to return to work for a period of time, which is typically 6 months long.

What are my options?

With income protection cover you have a number of different options. Typical payment periods are as follows: 12 months; 24 months; 60 months or until the end of the policy life (i.e. it does not restrict the claim length).

With income protection it is common to set the term length of the policy equal to either your expected retirement age or the end of a mortgage. For a policy with a payment period to the end of the policy life it means that a claim could run all the way until retirement if you were unable to return to work.

What is best?

Given that one leading insurer, Liverpool Victoria, published claims data showing that their average claim length was 7 years long it is usually best to have a policy that doesn’t limit the payment period (i.e. it could payout until retirement).

Naturally, the payout length may depend on your budget as the longer the payment period the higher the monthly premium charged by the insurer. To see various options for yourself you can get a quote here or speak to one of our advisers on 01273 646 484

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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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