Sick Pay Insurance provides a monthly income if you are unable to work due to accident or sickness.
Not everyone gets employer sick pay from their job – including the self-employed and company directors – while many other people only get the bare legal minimum (Statutory Sick Pay at £94.25 per week).
For those in this position, Sick Pay Insurance can step in to replace lost earnings while they are too ill or injured to work.
According to consumer group Which?, Income Protection is the one policy every working adult should consider.
Sick Pay Cover is designed to protect against anything that medically prevents you from doing your job. It’s there to cover the risk of:
Assuming you take out a policy with an ‘own occupation’ incapacity definition, you’ll be covered for any health condition that prevents you from working in your specific job role.
As with all insurance policies there are some common exclusions. These typically include illness or injuries sustained:
Other than that, what you are and aren’t covered for is simply determined by your pre-existing medical history.
Pre-existing Health Conditions
Pre-existing medical conditions need to be declared when setting up your Sick Pay Insurance and each insurer has their own stance on whether or not they will provide cover.
With existing health conditions most insurers will either:
If you have pre-existing medical condition it is worth popping us a call. We have direct access to the underwriters at all the top UK insurers and can make sure you get the best possible terms.
Please don’t hesitate to pop us a call on 02084327333 or email firstname.lastname@example.org.
The risk of being out of work through accident or sickness is higher than many people would think. It’s all too easy to assume that you won’t need Sick Pay Insurance. However:
For many people, the safety net isn’t as robust as it could be.
For instance, the average UK family spends upwards of £500 per week, yet our Drewberry Wealth & Protection Survey revealed that 2 in 5 of us have no more than £1,000 in savings – just 2 weeks’ expenditure – to cushion the blow if they couldn’t earn.
While some of us are lucky enough to get sick pay from an employer, not everyone does. Even where sick pay is available, it may only be minimal Statutory Sick Pay at £94.25 per week.
The graph below shows the potential drop in income should you have to survive on Statutory Sick Pay alone.
Sick Pay Insurance is therefore often a hugely important lifeline, especially for the self-employed who aren’t entitled to any employer sick pay at all.
If you had to rely on state benefits if you were out of work, these can also fall short of average household expenditure.
The main state benefit if you’re off work is Employment and Support Allowance (ESA), which is now part of the new Universal Credit. This starts at just £73.10 per week for the over-25s.
While other government benefits are available, these depend on the nature of your disability and your circumstances. Even combined these rarely add up to pre-incapacity household expenditure.
One of the most common questions we get asked is whether the self employed can get statutory sick pay.
It is important to note that although being self-employed can offer freedom and autonomy, one of the downsides is that you are not entitled to statutory sick pay.
Should an employed worker be off sick they are usually contractually entitled to 26 weeks of Statutory Sick Pay from their employer which is worth £94.25 per week. Many employers offer more than this as standard.
If you’re self-employed you need to look after yourself. If you have no self employed sick pay insurance you’ll have to see if you can claim government incapacity support, known as Employment and Support Allowance. This is part of the new Universal Credit and starts at £73.10 for over 25s.
Although other government benefits are available depending on the severity of your illness, they’re rarely sufficient to replace average UK household expenditure of more than £500 per week.
Which? Money states that Income Protection is the one protection policy all working adults should consider, a statement we wholeheartedly agree with. However, there are some groups of people who are particularly vulnerable and therefore we feel would benefit the most from cover:
We stand by the above statement from Which?, but the reality is that certain people simply wouldn’t benefit from Sick Pay Insurance.
This might be if you have plenty of savings to fall back on, get generous, long-term employer sick pay, have a partner whose income could pick up the slack if yours dropped out or anyone else who may be able to cope without their income.
Sickness Insurance is designed to replicate sick pay that you don’t receive from an employer or to provide a boost to a low level of sick pay / state benefits you’re entitled to.
It pays out a regular monthly income until either you’re well enough to return to work, your payment period runs out or until retirement (if you’ve selected long-term cover and are so incapacitated you can never work again).
When setting up Sick Pay Protection, there are four major decisions you’ll have to make which will have an impact on the cost of cover:
There are three main types of premium to consider when choosing sickness pay insurance if you are out of work:
Inflation is an economic force that acts upon the price of goods and services, usually pushing them higher year-on-year.
Think about the cost of a pint of milk 10 or 20 years ago – it cost a lot less back then! This is because inflation has acted on the price of milk and other goods and services over time.
This means that if you live on a fixed income, you may struggle to keep up with the cost of living because your income will remain the same but prices will continue to rise.
To solve this problem, you can opt to index link your insurance so that the payout keeps pace with inflation.
Each year, the insurer will write to you to inform you of the change to the retail prices index and to say that, if you agree, your benefit will rise by that amount so that it doesn’t get eaten away by inflation.
To compensate for the higher benefit, your premiums will also rise.
Indexation isn’t necessarily as important if you’re only going to hold the policy for a relatively short period, but with a long-term Sickness Insurance policy indexation is usually a good option to consider.
It’s vital to understand the definition of incapacity because this will impact on your ability to claim. It essentially determines the level of impact your accident or sickness must have on your working life before you can receive a payout.
There are three main definitions of incapacity to choose from when setting up Sick Pay Insurance:
Own occupation cover means that you will be entitled to your benefits as long as your injury or illness prevents you from working in your specific job role.
For example, an architect who injures their hand wouldn’t be able to complete technical drawings and so could make a claim.
Policies that use a suited occupation definition of incapacity mean that in order to claim benefits, you have to be unable to undertake your current job role or any other job where you may have experience or education to perform.
So where an architect with a hand injury may not be able to do their own job, they may not necessarily be able to claim under a ‘suited occupation’ definition because have the skills and experience to do another job role suited to them.
This definition of incapacity means you can only claim if you’re so totally unfit to work that you can’t work in any occupation / perform a set number of tasks required at most basic jobs, such as signing your name or typing.
This definition of incapacity is the most difficult to claim on and in general we’d recommend it is best avoided.
Neil is a client of Drewberry and took out an Income Protection policy with British Friendly. He was a member for 4 years before he needed to claim.
He became unwell and had pains in his stomach. After consulting his GP and having some further tests Neil was diagnosed with stage 2 Bowel Cancer and needed to make a claim.
Lucy is a designer. In the last tax year she earned £48,000.
After reviewing her monthly expenditure, Lucy decided to take out a long-term policy with a deferred period of 4 weeks covering 50% of her annual earnings, totalling £24,000 or £2,000 per month.
18 months after taking out the policy, Lucy had a fall and injures her back preventing her from working for 6 months whilst she undergoes treatment and makes a full recovery.
Making Her Claim
Lucy spoke with her insurer as soon as she knew she was likely to be out of work for more than 4 weeks. The claims form got completed and sent off to the insurer with supporting medical evidence. The insurer worked with Lucy and her doctor to approve the claim as quickly as possible.
The claim was successful and the benefit started being paid after her 4 week deferred period. Lucy relied on savings for the first 4 weeks until she received her first benefit payment of £2,000 from the insurer.
Over the 6 months she was out of work Lucy received five monthly payments of £2,000, totalling £10,000. These monthly payments enabled her to meet her mortgage repayments and other everyday bills so she could focus her attention on her recovery and getting back to work.
The vast majority of Income Protection providers now publish their claims statistics which is a real step forward in building trust.
Each year the Association of British Insurers (ABI) publishes average payout rate statistics from across all insurers. The latest figures are from 2017 and show that 87.2% of all Income Protection claims were paid, with over £600 million paid out in total.
Below is a table of the top 5 providers by their claims payout rate.
Legal & General
The monthly premium will depend on the above policy factors, as well as a range of personal factors, such as:
In the below table, we’ve laid out the average monthly cost of Sick Leave Insurance.
To work out the cost of cover, we’ve assumed:
The quotes below were pulled from our income protection quote tool and represent the cheapest policy that matches the above criteria from across the entire UK market.
AIG is one of only a handful Income Protection providers to offer cover for individuals with type 2 diabetes. It is also willing to offer diabetics guaranteed premiums and will not exclude diabetes in its policy, unlike other providers.
Aviva covers all policyholders with an own occupation definition of incapacity and, if you choose to return to work in a different occupation until you are well enough to return to your pre-incapacity occupation, Aviva will top up your reduced income with Back to Work Benefits.
British Friendly gives access to its Mutual Benefits program, which provides rewards such as vouchers for high street shops, discounted fitness tracking devices, emotional support services and online legal services.
Cirencester Friendly provides you with a range of additional benefits and services, including a hospitalisation benefit and a Friendly Voice service that provides you with a personal nurse that you can contact for advice and emotional support.
The Exeter is one of the few UK insurers that is able to offer own occupation cover to workers in higher risk occupations, although such policies only offer age banded premiums.
L&G comes with a free life cover element that pays out a maximum of 12 times your monthly benefit if you pass away while the policy is in force.
LV offers free access to unique LV Doctor Services, which include fast access to remote GP services, second opinion services and private prescriptions for policyholders and their children up to the age of 16.
Royal London can include Fracture Cover, which pays out a lump sum of between £1,500 and £4,000 on top of any benefit you’d receive for being off work if you receive a fracture of a specified body part
Shepherds Friendly allows you to apply to suspend cover and premium payments under your plan for a minimum continuous period of 3 months and up to a maximum continuous period of 24 months. This is known as ‘Career Break’ option.
Vitality provides a unique offering. While the core of its policy is similar to other providers’ offering, it also offers a unique set of additional benefits to those who participate in the Wellness / Optimiser programs that can include policy discounts and rewards.
We are here to ensure you and your family don’t miss out on financial security because you didn’t have appropriate sick pay insurance in place.
Our Sick Pay Insurance calculator will allow you to compare work insurance quotes from all of the leading UK providers so you can get a good idea of the potential cost.
Given the complexities of taking out the right cover particularly for the self employed, we would recommend speaking to on our team of experts. They are on hand to provide you with all the necessary information for you to make an informed decision.
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.
When setting up suitable Sick Pay Insurance it can all end up a little confusing and there are a number of pitfalls to avoid.
If you need any help please do not hesitate to pop us a call on 02084327333 or email us at email@example.com.
Director at Drewberry
I had the pleasure of dealing with Jake Mills in organising my insurance. Jake was fantastic to deal with — his patience and understanding really helped.