How Do I Make An Income Protection Claim?

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05/12/2023
7 mins

Income Protection pays you a monthly income worth a percentage of your pre-tax earnings if you suffer an accident or sickness that stops you working.

Insurers cover between 50% and 70% of your income. You use the benefit to maintain your essential outgoings while you’re unable to work, such as your mortgage / rent, bills and other commitments.

The best Income Protection provides long-term cover. This means the insurer pays your chosen benefit each month right up until you retire if you become so ill or injured you can’t ever return to your job.

However, before the insurer pays the benefit, you go through the claims process. This page offers a general idea of how to make an Income Protection claim, with a step-by-step guide, an example of one of our clients who made a successful illness claim and questions we’re frequently asked in this area.

How Do I Claim On My Income Protection Policy?

Once you have Income Protection, if you become ill or injured these steps offer a basic outline of how to claim:

  • An illness / injury stops you working and you take time off to recover.
  • Contact your insurer’s claims team as soon as you stop working.
  • Complete a claims form — most insurers let you do this online. Have to hand evidence of your medical condition, for example a doctor’s note, and proof of your earnings in the run up to your claim.
  • If your claim is approved, wait out your policy’s deferred period. You choose this when you take out cover. It’s how long you wait between falling ill and the insurer paying out. You usually align it with your sick pay or how long you could last on savings.
  • After the end of your deferred period, if you still can’t work your insurer starts paying a monthly benefit to replace your lost income.
  • You can claim until you recover, your payment period ends (for short-term cover, typically 1 or 2 years) or until your chosen retirement age if you can never go back to work.

Neil’s Cancer Claim With British Friendly

Bathroom salesman Neil came to Drewberry looking for Income Protection to cover his earnings in case he couldn’t work.

We advised him on a British Friendly policy and Neil took it out. Just 4 years later he was grateful for that decision — he needed to make a claim.

It started with a bout of stomach pains. After visiting his GP and having some tests, consultants diagnosed Neil with stage 2 bowel cancer. He needed immediate surgery.

While the surgery was a success, afterwards Neil developed severe sepsis requiring intensive care. He was completely unable to work during this period and his subsequent recovery at home.

Fortunately, he had his British Friendly policy and made a successful claim. Without it, he doesn’t know how he would have coped — here’s the difference it made to his life.

🤕 Read More About Neil’s Experience

Will My Insurer Pay a Claim When I Need It?

Most people understandably want to choose the insurer that pays the most claims.

However, it’s actually fairly hard to distinguish providers from each other in this area. Payout rates across the industry are not only higher than many people assume but are also fairly uniform.

For example, as shown in the table below, most providers pay more than 90% of all Income Protection Insurance claims they get. The top providers pay practically every single claim.

Insurer

2020

2021

2022

Zurich

85%

99%

85%

Vitality

96.8%

N/A

96.5%

Shepherds Friendly

N/A

95%

96.2%

Cirencester Friendly

94%

93.6%

95.4%

Holloway Friendly

98%

94%

93.4%

British Friendly

87%

84%

90%

Liverpool Victoria

95%

93%

92%

The Exeter

91%

93%

92%

Aviva

87.5%

85.4%

94.3%

Legal & General

93%

81%

82.2%

Frequently Asked Questions About Income Protection Claims

  • How Soon Can I Make a Claim?

    Few Income Protection policies have what’s known as a waiting period or an exclusion period. This is a length of time you must hold the policy before you can claim.

    As such, once the policy has gone live, if you were unfortunate enough to fall ill the very next day you would be able to claim (providing it’s for a condition your policy covers).

    When you apply for cover, the insurer asks about your medical history. It then decides what it will and won’t pay out for based on your pre-existing conditions.

    Providing the insurer hasn’t excluded the condition you’re claiming for due to you already having it before you took out the policy, you can make a claim almost immediately after the policy goes live.

  • How Long Will I Have to Wait for My Benefit?

    This depends on the deferral period you chose when you arranged the cover. The deferral period is how long you wait between falling ill and the insurer paying out.

    The shortest deferral periods are known as Back to Day 1 cover. Here, if you’re off work for 3 consecutive days, the insurer starts paying out and backdates the benefit to the first day of your illness.

    The longest deferral periods are 52 weeks, which might be an option for workers such as doctors, who get generous NHS sick pay.

    You typically align your deferral period with the amount of sick pay you get or how long you could live off your savings, keeping in mind that longer deferral periods mean cheaper premiums.

  • What is the Average Length of a Claim?

    Liverpool Victoria’s (LV’s) claims data shows their average Income Protection claim length as 7 years 7 months, while for Aviva average claim length for all claims in payment in 2016 was 3 years and 16 weeks.

    As you can see, the average Income Protection claim is measured in years, not weeks.

    It’s possible to take out Short-Term Income Protection, which provides budget cover. However, it only pays out for either 1 or 2 years per claim. This wouldn’t be enough if you were off work indefinitely. It’s also less than the average claim length.

    That’s why Drewberry tends to recommend comprehensive, Long-Term Income Protection where your budget allows. This will pay out each month right up until you retire if you become so ill you can’t ever go back to work.

  • Can I Claim State Benefits on Top of Income Protection?

    Employment and Support Allowance (ESA) is one of the main government incapacity benefits. It’s designed to help with living costs and, if possible, support you to get back to work.

    In most cases, you can claim ESA alongside your Income Protection benefit. However, if you’ve insured yourself for the maximum benefit an insurer will provide, some insurers deduct ongoing ESA payments from your benefit.

    This is to ensure you don’t receive more in income while you’re ill than the maximum the insurer will pay out.

    Eligibility for ESA depends on your circumstances and not all insurers take this approach. For further information, ask at your local Job Centre Plus or speak to one of our advisers.

  • Will My Premiums Go Up if I Claim?

    No, Income Protection premiums don’t go up just because you make a claim. You can claim as many times as you need to and, with long-term cover, for as long as you need to without directly affecting your premiums.

    This said, your insurer may be able to increase your premiums depending on the options you chose when you arranged the policy.

    There are three different types of premiums to choose from:

    Reviewable Premiums

    The insurer can increase these as it sees fit each year, perhaps due to experiencing many claims from its clients or because of a difficult economy.

    This can make it difficult to know how much your cover will cost each year. We therefore tend to recommend clients avoid them.

    Age-Banded Premiums

    With age-banded premiums, your premiums rise slightly each year in line with your age. This reflects the growing chance of you claiming as you get older.

    However, the insurer can only put your premiums up by a preset, agreed figure laid out in your policy documents.

    Guaranteed Premiums

    Fixed for the life of the policy, your insurer cannot increase these unless you change the plan.

    However, if you index-link your policy so the benefit rises annually to keep up with inflation, your premiums will also rise to compensate.

    Sophie Wilson, Independent Protection Expert at Drewberry

    While guaranteed premiums sound great, they’re the priciest option at the outset. Moreover, they’re not suitable for everyone. For instance, manual workers often get better rates with age-banded premiums, so don’t discount anything until you’ve studied all your options.

    Sophie Wilson
    Independent Protection Expert at Drewberry

  • Do I Have to Pay Tax on My Income Protection Payout?

    With personal Income Protection, you pay for the policy from your own individual bank account, using money you’ve earned that HMRC has already deducted tax and National Insurance contributions from.

    You’ve therefore effectively already paid tax on the premiums, so HMRC doesn’t charge tax on the benefit when you make a personal Income Protection claim.

    What About Cover for Directors?

    If you’re a contractor or company director working through your own limited company, you have the option to take out a special type of Income Protection designed specifically for how you work.

    This works slightly differently because your company pays the premiums. These premiums are typically an allowable business expense against your corporation tax bill, so you don’t therefore pay tax on the premiums for Director Income Protection.

    With this type of cover, when you claim the insurer pays the money into your limited company.

    It’s then up to you as the director / contractor to distribute it from there tax-efficiently in consultation with your accountant. At the point of distribution, HMRC taxes the benefit as it would your normal earnings.

  • Could the Insurer Reject My Claim?

    As with all insurance, there are a few exclusions that apply to everyone. For example, most insurers won’t pay out for illnesses / injuries sustained:

    • In the course of criminal activity
    • From illegal / illicit drug use, substance abuse or alcohol misuse
    • During foreign travel to areas of active internal conflict, high terrorism risk, political instability or countries the Foreign and Commonwealth Office (FCO) has advised against visiting.

    Other than this, there are few other blanket reasons the insurer might not pay out. What you can and can’t claim for is entirely dependent on your pre-existing medical history.

    What About Pre-Existing Conditions?

    During the application, insurers ask medical questions focusing on your health, particularly in the past 5 years. If you disclose a medical condition, the insurer might:

    • Cover the condition on standard terms (meaning you won’t face any difference in price or policy terms compared to a healthy individual)
    • Cover the condition for an additional premium
    • Exclude the condition but offer a date at which it will consider reviewing the exclusion
    • Exclude that condition entirely (perhaps with a premium discount to compensate).
    Michael Barrow, Independent Protection Expert at Drewberry

    If you have a pre-existing condition, it’s vital to speak to an expert, such as one of the team at Drewberry. We know the market inside out and can use our relationship with the underwriters at every UK insurer to find you the most favourable terms.

    Michael Barrow
    Independent Protection Expert at Drewberry

Need Help With Your Claim?

At Drewberry, we do have a claims management service that can help if you get stuck trying to make a claim.

For help in this area, you can call your adviser. Alternatively, we’re available on 02084327333 or you can email help@drewberry.co.uk.

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