Short Term Income Protection

Helping you protect all the things you work hard for...

Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

 

Why Short Term Income Protection?

 

Short Term Income Protection Insurance covers your monthly income should you suffer an accident, sickness or unemployment.

 

Designed to cover your core monthly financial commitments such as your mortgage/rent, bills and food.

 

Short-Term Income Protection Cover will pay out for any illness or injury that prevents you from working fo a maximum of 1, 2 or 5 years per claim.

 

Income Protection is the one protection policy every working adult should consider. Which? Money

What is it for?
 

What Does Short Term Income Insurance Cover?

Accident & Sickness

When the ‘Own Occupation’ definition of incapacity is used the policy can pay out for any medical condition that prevents you from working in your own specific job role.

LV’s claims data has shown that the average claim length was 7 years on an Income Protection policy, so it really does make sense to consider long-term protection rather than a short-term 12 or 24 month payout policy.

However, it’s worth speaking to your adviser about the pros and cons of short- and long-term cover, especially if you’re on a strict budget. There may be ways to reduce the cost of Accident & Sickness Cover without resorting to short-term cover.

Unemployment

Some plans also have the option where the policy can payout should you suffer forced redundancy. The payout length for unemployment cover is usually 12 months long.

What does it cover?
 

How Does Short Term Income Insurance Work?

Stage 1:
You are unable to earn an income due to accident, sickness or potentially unemployment.

Stage 2:
You make a claim with the your insurer, which may require completing a claims form and providing documents such as a note from your GP note or a redundancy letter.

Stage 3:
The insurer will start to pay a monthly tax-free benefit after you have been unable to work for the length of your deferred period.

Stage 4:
The policy pays out until either you return to work or reach the maximum payout length, which could be 1, 2 or 5 years (2 years maximum for Unemployment Cover).

How does it work?
 

Do I Need Short Term Cover?

When deciding if Income Protection is worthwhile it makes sense to weigh up the risk of something happening and the potential consequences:

The Incapacity Risk:
In the 3 months leading up to May 2017, nearly 2 million people in the UK were not working due to long-term sickness.

The Consequences:
With Employment Support Allowance averaging at £73.10 per week for the majority of claimants, and limited other disability benefits available, taking several months or years off work to recover from a health problem could result in serious financial difficulty.

The Question:
If you lost your income how would you continue to meet your essential outgoings without any Income Protection?

Do I need cover?
 

Your Key Options

Choose your level of cover
Depending on the insurer, it is possible to cover anywhere from 50% to 70% of your gross (pre-tax) income.

Choose your deferred period
This is the length of time you would need to be off work before the policy starts paying out. Deferred periods range from 1 day at the shortest, while the longest is typically 12 months. However, choosing a long deferred period on a short-term policy may not be the best course of action.

Choose your payout length
Short-term plans can payout for a maximum of 12 or 24 months and long-term policies will pay a claim until either you return to work or you reach the end of your policy. Many individuals we advisee therefore prefer the extra security of long-term cover.

What are my options?
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In This Guide

Andrew Jenkinson - Drewberry
Written by:
Alicia Hempsted
Content Manager at Drewberry
⏰  10 min read
 

What is Short Term Income Protection?

Having to take time off work with subsequent loss of earnings would cause significant financial problems for most individuals and families.

Even if our income stops, we’d still have our monthly expenses that need to be paid somehow. It’s therefore important to arrange insurance to protect against this risk, which is where Short Term Income Protection can step in.

Short Term Income Insurance can cover the risk of lost earnings as a result of accident and sickness, and with some plans unemployment also.

This type of plan would pay out a monthly benefit whilst you are off work, enabling you to keep up to date with rent/mortgage payments, utility bills, grocery costs and other vital monthly expenses for a short period of either 1, 2 or 5 years.

Rauri was easy to talk to. Explained everything really well. Took prompt action when requested and was in touch when he said he would be without being pushy.

Robert Eldridge
07/06/2018
how short-term accident & sickness cover works

How Does Short Term IP Work?

Josh Martin, Independent Protection Expert at Drewberry

Income Protection Insurance protects a proportion of your earnings if you are forced to take a break from work as a result of injury or illness. Policies will pay out monthly benefits equal to a percentage of your earnings to cover your essential expenses while you focus on your recovery.

Josh Martin
Independent Protection Expert at Drewberry

In the event that an injury or illness prevents you from working, a Short Term Income Insurance policy will pay out monthly benefits that will typically cover between 50% and 70% of your salary before your health condition developed. These monthly benefits are designed to help you meet your essential bills and expenses while you are out of work.

With a short term policy, you can continue claiming these benefits for up to 1 or 2 years, with some insurers offering a maximum payout term of as much as 5 years per claim.

Unlike Critical Illness Insurance, there is no list of conditions that you can claim for with Income Protection. Instead, you simply need to meet a set definition of incapacity to be entitled to your benefits. You can make as many claims as you need to while your policy is active, providing you continue paying your premiums and are employed when you make a claim.

  • Step 1: A health problem prevents you from working and you have to take leave to recover.
  • Step 2: After leaving work, contact your insurer’s claims team and provide them with a completed claims form, evidence of your condition, your policy number and sometimes confirmation of your current salary.
  • Step 3: After making your claim, you will need to wait out your policy’s deferred period. During this time you may be claiming sick pay from your employer or using savings to cover your typical monthly expenses.
  • Step 4: If you reach the end of your deferred period and you are still not fit to return to work, your insurer will begin paying out monthly benefits to supplement a proportion of your typical salary. These benefits will usually be paid directly into your bank account for you to spend on bills, loan payments, or household essentials.
  • Step 5: With a Short Term Income Protection policy, you will be able to claim these benefits up to your policy’s maximum payout term. This is usually set at 1, 2 or 5 years. Your insurer will stop paying out benefits for your claim if you return to work, if you reach the end of your payout term, or if you reach your cease age / retirement age.
  • Step 6: The payout term applies per claim on your policy. Provided you continue to pay your premiums, you can can claim again in the future for a different illness or injury, again for a maximum of 1, 2 or 5 years (depending on your policy). You can claim as many times as you need to on a short-term Income Protection policy up until your policy’s cease age.

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Income Protection Case Studies

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Be careful not to take out PPI instead of Income Protection when applying for a policy.

Beware of Payment Protection Insurance!

Sometimes PPI is advertised as Short Term Income Protection, but the two types of insurance are very different in terms of what they cover. That’s why it is so important that you take a closer look at the terms of your insurance policy before agreeing to it.

 

The Difference Between PPI and Short Term Income Protection

At first, PPI and Short Term Income Insurance can seem confusingly similar because they both cover you for accidents and sickness and pay out for a limited time. However, there are distinct differences to keep an eye out for that mean PPI generally provides inferior cover for incapacity:

  • PPI policies will usually only cover you under a Suited Occupation or Any Occupation definition of incapacity while most Short Term Income Protection policies will offer Own Occupation cover. Own occupation cover means you’re covered if you can’t do your specific job, whereas lesser definitions of incapacity could see the insurer ask you to do another job before you’re able to claim.
  • Many of the the top Income Insurance policies offer a range of premium types to choose from, including level guaranteed premiums which fix the cost of your policy when you first take out cover. PPI, on the other hand, most commonly offers reviewable premiums which are reviewed annually and could rise unpredictably each year.
  • Short Term Income Protection policies offer cover that is linked to your earnings, paying out benefits worth a percentage of your income before tax, while PPI is tied to a loan, such as your mortgage. This means that when you claim on a PPI policy, the benefits that you receive will only be enough to cover loan payments and will not help you afford all of your other financial obligations.
  • PPI policies are not typically medically underwritten. This means they require no medical information from you at the point of application, so you don’t know what you will and won’t be covered for based on your medical history further down the line if you need to claim. Income Protection involves full medical underwriting, so you know exactly what you’re covered for if you can’t work from the outset.
Samantha Haffenden-Angear, Independent Protection Expert at Drewberry

The quality and scope of cover varies significantly between these two policy types so it is very important to arrange the most appropriate plan.

We typically promote Income Protection over PPI for a variety of reasons, including greater breadth and depth of coverage and the fact that Income Protection will insure a percentage of your earnings rather than just covering loan payments.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

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Occupation Definition Calculator

Make sure your Income Protection covers you in your 'Own Occupation'!

Too often individuals take out income protection without being fully aware of the incapacity definition on which their plan would pay out.

Will the plan pay out if I am unable to do my current job role? Or will it only pay out if I am unable to do any occupation?

robertharveyportraitround

If you do not already have income protection this tool should provide you with guidance as to what to look out for and to ensure you do not fall foul of a lesser occupation definition.

Robert Harvey
Independent Protection Expert at Drewberry Insurance

Your Occupation
 
Manual Work (%)
Business Mileage
  annual mileage  
Overseas Travel
  trips per year
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Choose from Short or Long Term Income Protection Insurance to get the best cover for your needs.

Long Term vs Short Term Income Protection Insurance

While Short Term Income Protection is typically the more affordable option, long-term cover offers a great deal of benefits.

When looking for Income Insurance, it is common for people to think more about short-term injuries like a broken leg preventing them from working. Naturally, such an injury wouldn’t keep someone off work for very long and so people think that they would only ever need to claim income benefits short a short period of time.

Of course, the loss of two or three months earnings would be a massive inconvenience for most households, but the loss of two or three years of earnings could be financially disastrous. The reality is that the real financial risk comes from more serious illness or injury and these occur more frequently than most people believe.

 

Will Short-Term Income Protection Be Sufficient?

In 2016, top insurer Liverpool Victoria found the average Income Protection payout term length to be 7 years and 7 months. With a short term policy, someone claiming for this length of time would run out of income early on into their recovery. This means that they may need to return to work before they are completely healthy or turn to government provided benefits, which often provide barely any financial support.

However, with a Long Term Income Protection Insurance policy, policyholders that meet the appropriate definition of incapacity can continue claiming benefits for as long as it takes for them to recover, or until they reach retirement.

jake mills, independent protection expert at drewberry

If you are looking for comprehensive protection against serious illness and injury, then Long Term Income Protection really is the way to go. However, if you’re not sure whether Long or Short Term Income Insurance is right for you, feel free to contact our advisers for some expert advice.

Jake Mills
Independent Protection Expert at Drewberry

Short-term policies are all very well for injuries that will heal quickly, but what about long-term issues, such as paralysis, that might mean you can never work in your own job ever again?

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Adjust your cover with the right Short Term Income Insurance policy options.

Key Policy Options for Short Term Income Insurance

When looking for Income Protection cover there are a number of important policy options for to consider.

Level of cover

It is very important to note that most insurers have limits on the maximum amount of cover you are able to insure. As will as limiting the maximum percentage of your salary you can insure, most insurers will also have a maximum benefit they are willing to pay.

For example, Aviva are only willing to cover up to 55% of your gross salary, but the maximum that they offer in terms of benefits is £20,000 per month. On the other hand, British Friendly are willing to cover as much as 70% of your pre-tax earnings, but the maximum benefit they are willing to pay out is only £3,750 per month. You’ll need to choose your insurer to match the benefits you’re likely to need.

Sam Barr-Worsfold, Independent Protection Expert at Drewberry

When choosing the appropriate level of cover, it’s best to avoid the temptation of choosing the maximum amount available. More cover means higher premiums, and you may not need that much cover.

The best method of deciding the appropriate level of cover is to compare your monthly salary to your monthly expenditure and try to match that amount with your Short Term Income Protection benefits.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

Deferred Period

Policy Cease Age

Inflation Linking

Premium Type

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Compare Short Term Income Protection Quotes from the Best UK providers/.

Compare Best UK Short Term Income Protection Quotes

For expert guidance and help comparing Short Term Income Protection quotes, speak to Drewberry advisers.

AIG

AIG

  • Cover Limit: 60% of the first £30,000 of your salary,
    55% between £30,000 and £100,000 of your salary,
    45% of any of your remaining salary.
  • Maximum Benefit: £20,833 per month
  • Payout Term Length: 2 years
  • Deferred Period: 4 / 8 / 13 / 26 / 52 weeks
  • Maximum Entry Age: 54 years old
Aviva

Aviva

  • Cover Limit: 55% of your gross salary
  • Maximum Benefit: £20,000 per month
  • Payout Term Length: 2 years
  • Deferred Period: 4 / 8 / 13 / 26 / 52 / 104 weeks
  • Maximum Entry Age: 59 years old
Legal and General

Legal and General

  • Cover Limit: 60% of gross earnings up to £60,000 per year and 50% of your remaining salary
  • Maximum Benefit: £8,333.33 per month
  • Payout Term Length: 2 years
  • Deferred Period: 4 / 13 / 26 / 52 weeks
  • Maximum Entry Age: 60 years old
Royal London

Royal London

  • Cover Limit: 65% of your gross earnings up to £15,000 and 55% of your remaining salary
  • Maximum Benefit: £250,000 per year
  • Payout Term Length: 1 year / 2 years
  • Deferred Period: 4 / 8 / 13 / 26 / 52 weeks
  • Maximum Entry Age: 59 years old
The Exeter

The Exeter

  • Cover Limit: 60% of your gross earnings up to £100,000 and 40% of your remaining salary
  • Maximum Benefit: £10,000 per month
  • Payout Term Length: 2 years / 5 years
  • Deferred Period: Day 1 or 1 / 4 / 8 / 13 / 26 / 52 weeks
  • Maximum Entry Age: 59 years old
Short Term Vitality Income Protection

Vitality

  • Cover Limit: 50% of your gross salary
  • Maximum Benefit: £10,000 per month
  • Payout Term Length: 2 years
  • Deferred Period: 1 / 3 / 4 / 8 / 10 / 12 months
  • Maximum Entry Age: 59 years old

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Speak to Drewberry financial advisers about income protection

Get Short Term Income Protection Advice from Drewberry

If you would like to discuss your options with a Drewberry adviser or if you need any help applying for Short Term Income Insurance, please feel free to call us on 01273646484. Our experts are trained to help.

Robert Harvey, Independent Protection Expert at Drewberry

Not only can we help you get to grips with your policy, but our advisers will also compare quotes for you and provide you with an easy-to-read email report summarising the best policies and providers available to you.

Robert Harvey
Independent Protection Expert at Drewberry

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Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Income Required
per
month
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Frequently Asked Income Protection Insurance Questions

 
I have been doing some research online for an income protection plan but don’t know whether it...
 
I want to take out this cover but loads of places have declined to quote stating that I am over the maximum...
 
I want some insurance to cover my salary if I am too ill to work as I don’t have much sick pay....
 
What does this deferred period actually mean and will my claim be backdated if there is a deferment period?...