- Who needs Income Protection?
- What are my options?
- Top income protection providers
- Income Protection or Payment Protection Insurance?
- Get ExpertAdvice
Content Manager at Drewberry
Who Needs Income Protection Insurance?
Income Protection is designed to pay out a regular monthly income, insuring your wages in case you ever become too ill to do your job.
Accidents and illnesses are a lot more common than most of us think. In addition, a lot of us simply don’t have the savings necessary to sustain us if we were out of work long-term.
According to Drewberry’s 2017 Wealth & Protection Survey…
- 2 in 5 households don’t have more than £1,000 in cash savings
- Only 6.2% of Brits have Income Protection
- 1 in 10 people say their finances are ‘hanging by a thread’.
Meanwhile, approximately 70,000 on average are injured at work in Great Britain every year and an October 2017 government report found that 300,000 people lose their jobs each year due to mental health conditions.
If you were forced to take more than 6 months off of work for any reason, how do you think you’d cope?
What are my Income Protection options?
One of the main reasons why so many people use our Income Protection advice service is the large number of choices that need to be made when you take out a policy. This might seem overwhelming at first, but at Drewberry our experts can help you through the process to get the best cover for your circumstances.
What are the Different Types of Income Protection?
The first thing you will need to decide when you begin looking at policies is what you would like to have covered in your policy.
Accident & Sickness
This is a standard Income Protection policy that will cover any accident or illness that prevents you from working.
Insurance providers don’t have a defined list of conditions you can claim for – instead what you are and aren’t covered for depends on your medical history and pre-existing conditions. Also, with own occupation cover, you are protected should any illness or injury prevent you from being able to do your job.
Accident, Sickness & Unemployment
Some Income Protection policies can cover unemployment without the cause being an illness or injury. Usually, they will cover forced redundancy and provide cover for up to 12 or 24 months allowing the policyholder time to find another job whilst still being able to meet their monthly financial commitments.
It’s important that you carefully look over protection policies that include unemployment cover. Many of the terms and conditions make these policies particular difficult to claim on if you are self-employed or a company director, it is important you get expert advice to ensure such a policy is suitable.
Independent Protection Expert at Drewberry
Your Key Policy Factors
There are a range of policy options to choose from that will adjust the level and cost of cover you get from your policy, allowing you to tailor your policy to meet your specific needs.
The cease age is the age at which your policy ends. It’s typically possible to extend your policy to a cease age of around 70.
However, many people are free from major commitments before this age and often roll back the cease age to 65 or even 60 as this can offer significant savings on the cost of Income Protection.
The deferred period is a decided length of time that you need to be out of work for before you can begin to claim for incapacity. This can range anywhere from one day to two years. The longer you can wait before claiming Income Protection Insurance, the lower your premiums will be.
Guaranteed premiums, reviewable premiums and age banded premiums are the usual types of payment that you can choose from. Each has a different initial cost and will alter how much you pay for your cover over time.
Guaranteed premiums remain fixed (unless you opt to index-link the cover to keep up with inflation). Age-banded premiums rise in line with your age in a fixed pattern laid out by the insurer in the policy documents.
When it comes to reviewable premiums, Drewberry rarely recommends these as they can increase by an arbitrary amount each year depending on a variety of factors, including some outside your control, such as the number of claims the insurer has experienced over the past year.
Independent Protection Expert at Drewberry
This refers to the length of your claims period. The best Income Protection is long-term and has an unlimited claims period which allows you to continue receiving benefits for incapacity right up until the day your policy ends. However, some insurers offer short-term Income Protection as a cheaper alternative, which often has a maximum claims length of one, two or five years.
If you opt for long-term cover and have many years until the policy cease age, we’d typically recommend that you index-link your Income Protection benefit to ensure that it keeps pace with inflation. It does cost a little more, but it will ensure the spending power of your payout won’t be eroded over time.
Who are the Different Income Protection Insurance Providers?
There is a lot to consider when looking at insurers that goes beyond just the cost of their policies. Some insurers offer additional benefits that can enhance your cover.
Comparing insurers can be a difficult task to tackle alone, which is why we’re here to help. As well as offering Income Protection advice, we can collect and compare quotes from insurance providers to help you find the best deal.
Top 5 UK Income Protection Providers
Aviva is one of the largest insurers in the world, operating in more than 28 countries
Aviva’s Income Protection Plus uses the own occupation definition of incapacity and offers benefits worth 55% of your income up to £20,000 per month.
Aviva also offer a range of options that allow you to cut the cost of your policy, such as a choice between guaranteed or reviewable premiums and the availability of a limited payout term.
Legal & General have more than 10 million customers worldwide. In 2015, their Income Protection policy won an award from COVER Excellence.
L&G’s Income Protection policy is idea for individuals in low risk occupations that would like to make the most of their situation.
Policyholders get access to own occupation cover, a guaranteed monthly benefit of up to £1,500, and benefits worth 60% of their earnings up to £200,000 per year.
Liverpool Victoria are a friendly society and one of the UK’s leading providers of financial services.
LV Income Protection can cover up to 60% of your earnings.
Their additional benefits include fracture cover and special conditions for teachers and medical professionals working in the NHS.
Vitality is one of the newest insurers providing Income Protection, having been founded in 2007.
Vitality has a unique optional element that can be added to its VitalityLife Income Protection which allows policyholders to claim rewards.
By taking an active approach to staying healthy while you have your policy, you might be able to lower the cost of your premiums, get cashback, or get discounts from Vitality.
Royal London is a mutual society and so operates for the sake of its members. Its Income Protection policy provides enough options to make it accessible for most people wanting to protect their income.
Royal London also offer a unique ‘Helping Hand’ service with their Income Protection policies at no extra cost. This provides policyholders with practical and emotional support from personal nurses and counsellors.
Income Protection or Payment Protection Insurance?
A lot of confusion has surrounded these two types of protection products. Many people have assumed that these two products are the same thing. However, there are a lot of key differences between Income Protection and Payment Protection that you need to be aware of.
While one product will offer reliable protection for you and your loved ones, the other won’t cover much more than your loan payments. That’s why we’d always recommend getting advice to make sure you’re getting the right product for your needs.
Designed to protect your income
Designed to protect your loan payments
Cover for 50%-65% of your earnings
Cover is aligned with your outstanding debts
Can offer long-term protection, paying out until you retire
Short-term protection only – policies pay out for a maximum of 12-24 months
Own occupation cover is available that will protect you if you can’t do your specific job
Cover is typically suited occupation
You’re medically underwritten from the start of your policy, so you know what you are and aren’t covered for right away
Insurers assess your ability to claim only when you attempt to, meaning you don’t always know what will and won’t be covered
Victoria swiftly helped in finding a solution which offered the required cover, with a more competitive premium.
Getting Income Protection Advice
At Drewberry, we offer free and impartial financial advice, helping to pair you with the right protection products to meet your needs. If you’re interested in taking out an Income Protection policy, our advisers will help you find one that suits your needs. We have access to the entire UK market, so are well-suited to search out the right policy for you.
Get Income Protection advice from our expert financial advisers today and secure your earnings. Contact us on 01273646484.
Director at Drewberry