When considering Income Protection Insurance it makes sense to try and find out which is the best policy but this can be hard to pin down as it will depend on your individual circumstances and requirements.
There are a number of factors which will need to be considered when searching for the best Income Protection policy including:
- Your occupation
- Employment status
- Current health and lifestyle choices
- Sick pay entitlement and savings
Each insurer has their own terms, underwriting and preferred type of client type so depending on how risky your job is or whether you smoke will impact on the best provider for you.
In addition to this expert guide we have also written expert product reviews for each of the top UK income protection providers individually including Aviva, Legal & General and Vitality.
EXPERT TIP 🤓
According to consumer group Which?, Income Protection is the one policy every working adult should consider.
Getting The Best Income Protection
This really depends on whether you are looking for Accident & Sickness cover only or whether you are looking to include Unemployment Insurance.
If your primary concern is protecting your income against the risk of illness or injury, then the best policies tend to have the following features:
Own Occupation Incapacity Definition
An Own Occupation definition of incapacity means that the plan will payout if you are unable to undertake your specific job due to any illness or injury (please note that many Payment Protection Plans use the ‘suited occupation’ definition of incapacity).
Long-Term Or Short Term Income Protection?
Short-Term Income Protection is considered a budget option, as it will often have a maximum claim length of 2 years. Traditional Long-Term Income Protection would continue to pay a claim right up to the end of the policy term if you’re unable to return to work.
Given LV’s average payout length of 7 years, it makes sense to take out a plan that wouldn’t limit the length of time it can payout for (i.e. it can payout until retirement if you are unable to return to work).
Popular policies with these characteristics include plans provided by Liverpool Victoria (LV), Aviva and Exeter Family Friendly.
Including Unemployment Cover
Unemployment Cover is not usually offered under Income Protection plans, but there are some instances where it’s available as an optional add-on. However, when looking for insurance policies that cover accident, sickness and unemployment, great care needs to be taken as many of these polices will be Payment Protection rather than Income Protection.
Avoiding Payment Protection ⚠️
We normally advise that people looking to protect their income avoid purchasing PPI because often the protection they provide isn’t as comprehensive as a traditional Income Protection policy.
They often use the suited occupation definition of incapacity (which means you can’t claim if you are fit enough to work in other job roles), have reviewable premiums (where the insurer has the right to change the amount they charge you based on a range of factors) and can usually only payout for a maximum period of 12 or 24 months.
If you’re certain that you want unemployment cover, it may be worthwhile considering purchasing a separate Unemployment Insurance policy. This will ensure that you can still claim on a long-term basis for accident and sickness as well as claim benefits on a short term basis if you’re made redundant.
Which Income Protection Cover Has The Best Terms & Conditions?
As mentioned above, it’s important to take out a plan with the own occupation incapacity definition, so you’re covered in your specific job role.
Lesser incapacity definitions include ‘suited occupation’ cover (where the insurer would assess your skills, experience and education and could decline a claim if they thought you were capable of undertaking another ‘suited’ job) and ‘activities of daily living / work tasks’ (where the insurer would make you undertake functional tests like walking or getting dressed before they would pay a claim).
Read The Fine Print
When deciding which is the best Income Protection plan for you, it’s vital to check the terms and conditions, as there are some plans in the market that would switch from own occupation cover after 12 or 24 months of a claim (such as Legal & General if you are a manual worker and Holloway Friendly).
Which Income Protection Has The Least Exclusions?
With any good Income Protection policy, it’s often the case that policies do not have any standard exclusions. So, the insurer would payout for any medical condition that prevented you from working, irrespective of how it arose.
No Standard Exclusions For Accident Or Sickness
Some Standard Exclusions For Accident Or Sickness
- Legal & General
Incapacity resulting from drug, alcohol or solvent abuse;
War or civil commotion.
Please note though if you travel overseas for business or think there is a possibility that you may reside outside of the UK in the future, then some policies do have restrictions. If you need help, please don’t hesitate to pop us a call on 02084327333 or email email@example.com.
Redundancy Insurance Exclusions
Most insurers have an initial unemployment exclusion period where you cannot make a claim within the first 120 or 180 days of taking out the policy. Most plans only cover forced redundancy (i.e. you cannot take voluntary redundancy or get asked to leave due to poor performance).
Which Income Protection Providers Have The Best Payout Rates?
It’s very natural to consider one Income Protection insurer as being better than another based on payout rates (i.e. the percentage of all claims that are paid).
For those insurers that do publish payout rates, they tend to be very high, with most providers publishing rates that are over 90% of all claims made.
Please note that the payout rate is very unlikely to ever be 100%, as there are always going to be issues with people not being truthful on their application and trying to claim for current / ongoing conditions.
Making An Income Protection Claim
Paying claims is the most important thing Income Protection insurers can do. Over the past few years, there have been a number of developments, making it easier for clients to claim as well as speeding up the process of approving claims.
A number of insurers now aceept claims over the telephone, completely doing away with lengthy claims forms.
If you have an Income Protection policy and have suffered an illness or injury you think will result in a claim, you’re best to let your insurer know as soon as possible. The sooner they can start processing a claim, the quicker they can approve it and start paying your benefit.
British Friendly And Neil’s Cancer Claim
Neil is a client of Drewberry who took out an Income Protection policy with British Friendly. He’d had his policy for just 4 years before falling ill.
After experiencing a bout of stomach pains, Neil took himself to his GP who referred him on for further tests. These tests discovered that he unfortunately had bowel cancer, and it was already at stage 2.
Neil needed surgery to remove the cancer, but developed post-operative sepsis and had to spend several weeks in hospital recovering, completely unable to work.
British Friendly began paying him a proportion of his earnings after his deferral period, allowing him to keep up with all the important bills, such as his mortgage, which he was unwell.
🤕 Read More About Neil’s Claim
Which Insurers Offer The Best Premiums?
The premiums offered by each insurer depend on a number of factors, such as:
- Your Age
- Smoker status
- Your current health
- Your occupation
- The level and length of cover
- Deferred period
Different insurers have different attitudes to risk, with some being more competitive when covering higher risk occupations or when needing a much longer deferred period.
As a result of this, there is no hard and fast rule who will be most competitive, particularly if you have medical conditions you need to disclose.
You can use our Income Protection comparison tool to see how much the premiums would likely cost from the best Income Protection insurers. However, nothing beats speaking to an expert adviser, as there are some insurers who simply don’t provide online results.
Please feel free to give pop us a call on 02084327333 to gain access to all quotes that would be available to you.
Example Cost Of Income Protection
In the below table, we’ve laid out the average monthly cost of a good Accident and Sickness Insurance policy, as well as an option including Unemployment Insurance.
To provide you with an example cost of Income Protection, we’ve made a number of assumptions:
- The client is a healthy and in a low risk occupation
- They want to cover £1,500 per month
- They can survive without an income for 8 weeks
- They are planning on retiring at age 65
- They would like to fix the cost of the policy with guaranteed premiums.
The Income Protection quotes below represent the cheapest policy that matches the above criteria from the best Income Protection insurers in the UK.
Compare 12 Best UK Income Protection Insurance Providers In 2023
Being independent insurance brokers, we work with all the top UK insurers when finding our clients the best cover.
To help you navigate the many potential pitfalls, we’ve put together this table summarising each of the major insurers products and our verdict on each of them.
The Best Way To Set Up Income Protection
When setting up your Income Protection Insurance policy you can go direct to an insurer or take out cover through an intermediary. It’s important to recognise the difference, as one provides you with a lot more protection than the other.
- Going direct to an insurer
If you go direct to an insurer to set up your policy, it’s considered a non-advised sale. As you have made the decision to take out this policy, there’s no financial protection should the policy be inappropriate – the responsibility lies on your shoulders.
- Using an adviser
Utilising an adviser who provides an advised sale means they’re responsible for the policy they help set up. They need to understand your circumstances fully, including any existing health conditions, to make sure you take out the most suitable cover for your needs. If it turns out their advice was not appropriate, the responsibility sits with the adviser.
Here at Drewberry, we provide a fully advised service so you benefit from expert advice and know you have that additional level of protection should something go wrong.
We’re proud of the service we provide, and our clients think so too with 3640 independent reviews on Reviews.co.uk rating us at 4.92 / 5.
Our expert in-depth review of each of the UK's leading providers
What is better Income Protection or Critical Illness Cover?
Although these products may seem similar, they provide financial protection in different ways. Each has their own merits and are used in different ways.
Income Protection is designed to cover anything that medically prevents you from doing your job and pays out a monthly income to cover your regular bills.
Providing you choose the ‘own occupation’ definition of incapacity, Income Protection pays out for accidents, illnesses and injuries that prevent you from doing our specific job role. You won’t be asked to perform any other job role if you can’t do your own occupation.
Common illnesses claimed for under Income Protection policies include mental health issues, musculoskeletal problems (e.g. bad backs) and cancer.
Critical Illness Cover pays out a tax-free cash lump sum should you be diagnosed with a critical illness (such as cancer, heart attack or stroke) of a specified severity to claim.
Critical Illness Cover is limited to the illnesses defined in the policy terms and conditions. Whereas Income Protection pays out for anything that medically prevents you from working.
Do I really need Income Protection?
The question of whether you need Income Protection ultimately depends on your circumstances, but here are some factors to consider if you fell ill without it:
- Could you survive on your savings for any considerable length of time?
- Could you survive on government benefits, typically Statutory Sick Pay at £109.40 per week or Employment and Support Allowance at £74.35 per week?
- How would your family cope with a sudden loss of income in terms of paying the bills, keeping up with the rent / mortgage, buying groceries, keeping a car on the road etc. if they didn’t have some form of continuation of income?
If you’re not sure about the answers to these questions, Income Protection might be something to consider to protect your family and your finances in case you can’t work through accident or sickness.
What's the maximum Income Protection benefit?
The maximum Income Protection benefit is typically 70% of your income for a personal policy. Insurers tend to offer between 50%-70% of your gross (pre-tax) income as a benefit.
The reason you can’t insure 100% of your gross income is because, after taxes and National Insurance, you don’t receive 100% of your gross income from your employer or your self-employed activities each month / year.
Most insurers will have a maximum ceiling in terms of the amount they’re willing to cover you for on an annual basis. This could be as low as £45,000 or up to £250,000, so it’s important you choose the right insurer for your level of income.
How long does Income Protection last?
Short-Term Income Protection will pay out for a maximum of 1, 2 or 5 years per injury / illness, per claim. However, the policy lasts until your set retirement age, so you can claim as many times as you need to with different illnesses or injuries for the maximum term.
If you suffer an illness / injury that takes you beyond the maximum claims period on Short-Term Income Protection, your payments will cease.
Long-Term Income Protection is a more comprehensive option, as you can claim as many times as you need to, for as long as you need to, right up until retirement age.
If you’re ever so ill you can never work again, you’ll be entitled to receive your Income Protection benefit right up until your chosen policy cease age.
Compare Best Income Protection Quotes & Get Expert Advice
Finding the best Income Protection can be a bit of a minefield, particularly given the confusion that can occur with Payment Protection and the importance of getting ‘Own Occupation’ cover.
Our expert advisers are here to ensure you have the information and the support you need when setting up the most appropriate Income Protection for your circumstances.
Why Speak to Us?
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
Please don’t hesitate to give us a call on 02084327333 or email firstname.lastname@example.org, we are here to help.