Why Sick Pay Insurance?
Sick pay insurance provides you with a monthly income if you cannot work due to accident or sickness
Designed to cover your core monthly financial commitments such as your mortgage/rent, bills and food.
Income Protection is the one protection policy every working adult should consider. Which? Money 2013
Speak to our expert independent advisers or get an instant online quote to compare the UK’s leading insurers.
What does Sick Pay Insurance cover?
Sick pay cover is designed to protect you against the risk of lost earnings due to any illness or injury which prevents you from working.
These policies are the most comprehensive way of protecting yourself financially during any period of sick leave as unlike critical illness insurance the cover is not limited to a set list of medical conditions.
Policies which use the “Own Occupation” definition of incapacity are the most comprehensive as they cover you if you are unable to do your own job even though you might be able to work in another role.
How does Sick Pay Insurance work?
You are unable to work due to an illness or injury.
You make a claim with the insurer.(You will need a letter from your doctor and may need to complete a claims form).
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.
The policy pays out until either you return to work or reach the maximum payout length, which could range from one year to retirement.
Do I need Sick Pay Insurance?
It is useful to think of the risk of being off sick and how you would continue to meet your monthly expenses.
The Incapacity Risk:
1 in 10 people have been unable to work due to illness or injury for +6 months (The Guardian/Unum Survey, 2011).
With government incapacity benefit of only £99.15 per week, someone with a salary of £30,000 would suffer a 77% fall in income.
If you lost your income how would you continue to meet your bills if you didn’t have any sick pay insurance?
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. The shortest deferred period is 7 days and the longest is 12 months.
Choose your payout length
Short-term plans can payout for a maximum of 12 or 24 months where the long term alternative will continue to pay a claim to the end of your policy term should you been unable to return to work.
Victoria had excellent on the spot knowledge and vast experience in my line of work. Even where she didn't know, she was able and willing to promptly clarify with colleagues and insurers.Risheka Walls
What is Sick Pay Insurance?
Sick pay insurance provides a means of protecting yourself from the risk of losing your income in the event of short term and long term sickness and injury. It pays a monthly benefit which is tax free. The benefit can be used to cover monthly mortgage payments or other essential outgoings but is yours to spend as you choose.
Sick pay insurance can be claimed in addition to any state benefits for which you qualify. Most people would not be able to cover their outgoings on state benefits alone.
Long term insurance plans could potentially cover your earnings until you plan to retire, therefore providing long-term earnings protection and peace of mind.
Short term policies will pay out for as long as you are unwell, for up to 12 or 24 months.
Do I need it?
One of the largest financial risks we face in life is the loss of our ability to earn an income due to sickness or injury. After all, our livelihood depends upon our ability to go to work each day and earn an income to pay for our rent/mortgage, utility bills, groceries, childcare costs and other living expenses.
The Department for Social Development statistics showed that the average claim length for individuals Incapacity Benefit (IB) was just over 4 years (based on 2009 figures).
With government incapacity benefit standing at only £99.15 per week would you be able to survive on this income for a long period of time?
Key policy options
How long can the cover last?
The minimum term is usually 12 months and the maximum term is often to age 65, although some insurers will allow you to take out cover until the age of 70.
It is usually best to set the policy length equal to the age at which you plan to retire, thus providing earnings cover and therefore financial protection for the remainder of your working life.
Should you need to make a claim the policy has the potential to pay out each and every month until the policy term ends, however long you decide to set it.
How much income can I cover?
For most insurers this depends on your income and is usually up to 70% of your gross monthly income. You should look to insure enough to cover your essential monthly outgoings, such as rent/mortgage payments, household bills, debt repayments and general living expenses.
What is the deferred period?
The deferred period (also known as an excess period) is the length of time before you will receive a payment after being signed off work. It usually makes sense to set this period equal to the length of time your employer will pay you full sick pay.
A deferred period can be as short as one day or extended out to a full year. Alternatively you could consider how long you could live off your savings. The longer the deferred period the lower the premiums.
Need some advice
If you would like to receive sick pay insurance quotes from a panel of leading UK insurers then please submit your details in the quote box provided above. Alternatively, if you would like to talk through your options with one of your expert and impartial advisors then please feel free to contact us on 0208 432 7333.
Actual Income Protection Claims
The table below details real life stories of how an income protection policy has saved someone financially following an illness which left them unable to work.
The information is from Liverpool Victoria's 2011 claims, it demonstrates how anyone can lose their income, regardless of age, gender or occupation, LV's youngest claimant in 2011 was just 22 years old.
To provide expert financial advice and deliver a passionate 5-star service to help educate our clients so they can make informed decisions.
To help individuals and businesses throughout the UK to plan their financial future whilst protecting them against the financial risks they may face.
To provide quality financial advice in a transparent, friendly and professional manner.
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?
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.
Independent Protection Expert at Drewberry Insurance