Why Teachers Income Protection?
Provides you with a tax free monthly income you can rely on should you suffer an accident, sickness or forced unemployment.
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 Income Protection cover?
Accident & Sickness
When the ‘Own Occupation’ definition of incapacity is used the policy can payout for any medical condition that prevents you from working in your own specific job role.
Sick Pay Entitlement – Given you are likely to receive significant sick pay entitlement we are able to stretch out your initial deferred period to kick in after your sick pay entitlement ends which can significantly reduce your monthly premiums.
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.
How does Income Insurance work?
You cease working and earning and income due to accident, sickness or forced unemployment.
You make a claim with the your insurer, which may require completing a claims form and providing documents such as your GP note.
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 Long Term Protection?
When deciding if income protection insurance is worthwhile it makes sense to weigh up the risk of something happening and the potential consequences:
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 essential monthly outgoings if you didn’t have any income protection?
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
It is the time period you would need to be off work before the policy pays out. Given your sick pay entitlement your deferred period could well stretch out to 12 months.
Choose your payout length
Short-term plans can payout for a maximum of 24 months and long-term plans can continue paying out right up to the end of the policy term, which is usually set in-line with your expected retirement age.
Sam was knowledgeable and attentive and spent a long time explaining and working out what Income Protection insurance would be best for me.Elizabeth Owen
What is teachers income protection?
Income protection insurance for teachers exists to help you deal with some of life’s misfortunes that might prevent you from earning your normal income.
The basic premise is very simple, if you are unable to work due to any illness or injury your insurance provider will pay you a monthly income until such time as you are fit to return to work or you have reached the end of your policy term.
Most teachers often receive significant sick pay which can be as much as six months full sick pay followed by a further six months of half pay. This makes income protection extremely attractive proposition as you can opt for a longer deferred period to align with your sick pay entitlement which can drastically reduce the monthly premium of the policy.
Do I need it?
With government incapacity benefit standing at only £95.15 per week would you be able to survive on this income for a sustained period of time? That is if you are actually able to pass the stringent tests for eligibility of this benefit.
With most of the UK population having little more than a few months savings and with government support unlikely to meet your monthly financial commitments it is important to make your own personal arrangements.
Of course, you may be lucky and never be hit by misfortune of an accident or sickness which leaves you unable to work however most of us underestimate the real risk of long term illness.
Sick Pay Entitlement
It is important to check what sick pay entitlement you would receive from your employer. For most it can be as little as a few days of full sick pay however at the time of writing this, many teachers’ receive full sick pay for 6 months; followed by half pay for a further 6 months (for those teachers who are in their fourth successive year). This may vary depending on whether you work in the public or private sector and the terms of your employment contract, so it is worth checking your position.
How does it work?
To begin with, income protection insurance typically comes in one of two forms:
Short term cover
Such policies will typically continue to make income payments to you following a successful claim for a specified period of time, most providers offer either a 12 or 24 month product with a few policies providing cover for up to 60 months.
Long term cover
These are your traditional income protection products which were once called permanent health insurance, these policies are designed to protect your earnings against the risk of illness or injury for your entire career paying a claim either until you are fit enough to return to work or reach the end of the policy term (The policy term is most often aligned with your expected retirement age).
In the event of you being unable to work due to accident or sickness beyond your policy deferred period you simply need notify your insurance provider of the circumstances and they will work alongside you and your GP to assess the claim and ensure they are in a position to pay your claim in a timely manner.
Can I include redundancy insurance?
Although long term permanent health insurance products plans are designed to cover accident and sickness (often referred to as incapacity or disability) a very limited number of policies have an option to include short term redundancy protection. This option is not suitable for everyone so please call us to run through your current situation.
Specialist income protection for teachers
Income protection for teachers can be tailored to meet your needs. For example, it might be worth noting that your income payments could be set up to commence only at the time when any of your employment-related benefits have ceased or diminished.
This deferred payment period means that benefits could be deferred at the time your claim is approved up to a date you specified at the outset. Extending the deferred period so it aligns with your sick pay entitlement means that the premiums can be reduced significantly.
It is also worth noting that most insurers would place teachers in an occupation risk class three (with four being the most risky). Naturally, there is no element of manual work involved with (classroom based) teaching but teachers have a very high claims rate for stress and depression so insurers feel it necessary to charge occupation risk class three premiums.
Important! Own Occupation Incapacity Definition
It is very important to read the terms and conditions of any income protection policy you are considering cover to cover. The most important factor with any policy being the incapacity definition used, given teachers are considered higher risk due to the level of stress associated with the occupation some insurers will only offer cover with a ‘Work Tasks’ incapacity definition.
We always advise individuals to only consider policies which use an ‘Own Occupation’ incapacity definition. Plans with an ‘Own Occupation’ incapacity definition will cover you if you are unable to do your current job role whereas a ‘Work Tasks’ definition will only pay a claim if you are unable to do a number of daily activities such as walking up a flight of stairs or bending over.
Excluding stress can reduce your premiums
Aviva provide income protection for teachers with an occupation risk class 3 (Risk class 1 being the lowest and risk class 4 the highest risk occupations). A risk class 3 occupation has significantly higher premiums than a risk class 1 to take account of the greater chance of illness or injury occurring.
For teachers Aviva will give you the option to exclude stress from your cover to move you from a risk class 3 to a risk class 1 significantly reducing your monthly premiums.
What are my options
When you are selecting a policy, you may need to think about the following options:
Length of cover
Short-term cover is available for 12 or 24 months (depending on the provider), or, in some cases, 60 months. Long-term income protection cover may protect you up until your normal age of retirement. Remember that the longer the term of the cover, the higher the premium may be if all other things are equal.
Level of cover
You may be able to obtain a monthly income payment of up to somewhere between 50-70% of your normal gross monthly salary. Once again, the higher the level of cover you select, the more your policy may cost you.
Length of your deferred period
The longer you make the gap between your claim being accepted and your payments commencing, the lower your premium will typically be. Given most teachers receive a significant level of sick pay entitlement we can often align the deferred with the end of your sick pay entitlement which can drastically reduce your monthly premiums.
Over time, inflation may erode the value of your monthly cover. Some providers may be able to offer you an index linked option though that might result in your annual premium increasing year by year – even with guaranteed (fixed) premiums.
Need some advice
Although the UK insurance industry has made huge strides over recent years in simplifying its language and processes, it has to be admitted that selecting an appropriate policy can still sometimes be a little complex.
Given the potential importance of this type of cover to you, it might be important to do all you can to avoid making mistakes in selection.
As qualified independent insurance intermediaries, we would welcome the opportunity to discuss your options further with you and to clarify anything in the above which is less than clear. We look forward to hearing from you, give us a call 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