Setting Your Deferred Period With Income Protection

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7 mins

When taking out Income Protection one of the biggest decisions you will need to make is the length of your deferred period.

The choice you make should align with any sick pay or savings you may have to rely on. It will impact several aspects of your policy as well having a significant impact on the monthly premium.

A Quick Video Intro To Deferred Periods

Not got enough time to read our guide, but want to hear what a deferred period is from an expert? Our very own Ben Brooks, gives us a simple answer. Just press play. 👇

What Is An Income Protection Deferred Period?

Income Protection is designed to insure your wages if you can’t work due to illness or injury. It will pay a continuation of income for anything that medically prevents you from doing your job.

When it comes to Income Protection, a deferment period is a fixed period of time you decide on that has to pass before your insurance will kick in and cover your income.

During this period, you might rely on savings, company sick pay or any other means and so won’t need the benefit straight away.

How Does The Deferred Period Work?

  • Step 1 :: You apply for Income Protection through an independent adviser such as Drewberry
  • Step 2 :: Between you and your adviser, you discuss the best deferred period for your circumstances
  • Step 3 :: After taking out the policy, you fall ill or injure yourself and are medically unable to do your job
  • Step 4 :: You submit your Income Protection claim
  • Step 5 :: If you’re still unable to work by the end of your deferred period you will begin receiving your monthly benefit.

The minimum waiting period for Income Protection is known as a back-to-day-one deferred period. With this type of policy, you would only need to be out of work for 3 days before you can begin claiming and, after those three days, your benefit would be backdated to the first day you were unable to work.

At the other end of the scale, the maximum Accident & Sickness Insurance deferred period is typically 12 months, although one UK insurer does offer a two year deferment period.

How Long are Excess Periods for Income Protection?

Typical deferred periods include:

  • Back to Day One Cover
  • 1 week
  • 2 weeks
  • 4 weeks
  • 8 weeks
  • 13 weeks
  • 6 months
  • 12 months.

Could My Deferred Period Be Extended?
If you have adverse medical history, your insurer may decide to lengthen your deferral period from the one you choose. However, not every insurer will do this and the medical conditions that this applies to will vary between providers.

The cost of your policy rises and falls depending on the probability of you making a claim. As you shorten your excess period, you become more likely to claim on it, which is why shorter deferment periods tend to be more expensive.

On the other hand, if you chose to set a longer deferred period, you could save money on your policy.

How Long Should I Set My Income Protection Deferred Period?

No two people are the same, so no two people would benefit from the same deferment period. The most suitable length of time for your insurance policy’s deferred period will depend on your unique circumstances.

You can adjust the length of your excess period to suit your needs. You can make it shorter, which means that you can receive your benefits sooner after you stop earning, or you can choose to increase the length of your deferment period and reduce the cost of your premiums.

For people with company sick pay, savings or other means to survive for a set period, then you can choose a longer deferred period.

The level at which you’ll start to notice a real, major difference in the cost of your Income Protection will be at 13 weeks. With a 13 week deferral period, premiums could be cut by as much as 50% compared with a policy with an excess period of four weeks.

For those with less of a cushion to fall back on – particularly the self-employed who get no sick pay – a shorter deferral period may suit.

How Long Will Your Sick Pay Last?

If your employer provides you with full sick pay, then you’d typically set your deferred period at a point in the future when your sick pay runs out. This is because it is not possible for you to claim both Income Protection benefits and full sick pay benefits at the same time, as you’d effectively have two incomes while off sick in these circumstances.

If you receive partial sick pay, then your Accident & Sickness policy might pay out a lower benefit while you’re on reduced sick pay, topping what you receive from your employer to the full value of your Income Protection benefit.

Public Sector Sick Pay Entitlement

If you are an NHS worker in the UK, then your sick pay policy will likely provide you with six months of full sick pay and an additional six months of half sick pay. Take a Doctor who is employed by the NHS, it is possible to begin claiming after the first six months of being out of work if you have Doctor’s Income Protection.

While you are receiving only 50% of your normal sick pay from your employer, your insurance provider will cover the other 50% of your pay.

How Long Will Your Savings Last?

Inadequate or a lack of sick pay is one of the main reasons why so many people take out Income Protection. If you are self-employed or do not receive any form of sick pay from your employer, then you will likely have to use your savings to cover your expenses while you can’t work.

In 2018, 16.1% of people stated that they did not receive any form of sick pay. Meanwhile, our 2017 survey found that more than 1 in 4 people had £500 or less in cash savings.

How much do you have in cash savings?

If you don’t get sick pay and only have limited savings, then setting a shorter deferral period is usually the better option so you don’t have to rely on your savings if you are unable to work.

How Do I Set a Deferred Period?

Setting your deferment period is very simple and is done when you apply for your Income Protection. The option to choose your excess period will be available when you first get quotes and is then finalised when you complete your official application.

You can use our online Income Protection quote engine to generate quotes with various deferment periods to see how the cost of cover changes depending on how long you can wait before making a claim.

You can change your deferral period at any time during your policy, although if you shorten the excess period you will face increased premiums due to the increased risk you face.

Get Expert Income Protection Advice

Setting a waiting period isn’t always easy and deciding between cost and level of cover can be difficult. That’s one of the many reasons it’s usually best to speak to an expert adviser when setting up your Income Protection.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 3821 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

If it is all getting a little confusing and you need some help then please don’t hesitate to get in touch.

Pop us a call on 02084327333 or email
Tom Conner

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