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What Is The Best Income Protection Insurance?

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When considering Income Protection Insurance it makes sense to try and find out which is the best policy but this can be hard to pin down as it will depend on your individual circumstances and requirements.

There are a number of factors which will need to be considered when searching for the best Income Protection policy including:

  • Your occupation
  • Employment status
  • Current health and lifestyle choices
  • Sick pay entitlement and savings

Each insurer has their own terms, underwriting and preferred type of client type so depending on how risky your job is or whether you smoke will impact on the best provider for you.

Regardless of the insurer, one of the most important things is to make sure your policy covers you in your ‘own occupation’, beware of ‘suited occupation’ or ‘activities of daily living’ cover.

If we consider which policy could be the best based on the plan’s coverage, terms and conditions, exclusions and payout rate we should be able to help narrow down your search considerably and put you in a much better position when deciding on the most appropriate cover.

According to consumer group Which?, Income Protection is the one policy every working adult should consider.

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Getting The Best Income Protection…

This really depends on whether you are looking for Accident & Sickness cover only or whether you are looking to include Unemployment Insurance.

If your primary concern is protecting your income against the risk of illness or injury, then the best policies tend to have the following features:

Own Occupation Incapacity Definition

An Own Occupation definition of incapacity means that the plan will payout if you are unable to undertake your specific job due to any illness or injury (please note that many Payment Protection Plans use the ‘suited occupation’ definition of incapacity).

Long-Term or Short Term Income Protection?

Short term income protection is considered a budget option as it will often have a maximum claim length of 2 years. Traditional long term income protection would continue to pay a claim right up to the end of the policy term if you are unable to return to work.

Given LV’s average payout length of 7 years, it makes sense to take out a plan that wouldn’t limit the length of time it can payout for (i.e. it can payout until retirement if you are unable to return to work).

Popular policies with these characteristics include plans provided by Liverpool Victoria (LV), Aviva and Exeter Family Friendly.

Including Unemployment Cover

Unemployment Cover is not usually offered under Income Protection plans, but there are some instances where it is available as an optional add-on. However, when looking for insurance policies that cover accident, sickness and unemployment, great care needs to be taken as many of these polices will be Payment Protection rather than Income Protection.

We normally advise that people looking to protect their income avoid purchasing Payment Protection Plans because often the protection they provide isn’t as comprehensive as a traditional Income Protection policy.

They often use the suited occupation definition of incapacity (which means you can’t claim if you are fit enough to work in other job roles), have reviewable premiums (where the insurer has the right to change the amount they charge you based on a range of factors) and can usually only payout for a maximum period of 12 or 24 months.

If you are certain that you want unemployment cover, it may be worthwhile considering purchasing a separate Unemployment Insurance policy. This will ensure that you can still claim on a long-term basis for accident and sickness as well as claim benefits on a short term basis if you are made redundant.

Which Income Protection Cover has the Best Terms and Conditions?

As mentioned above, it is important to take out a plan that provides own occupation incapacity protection so you are covered in your specific job role.

Lesser incapacity definitions include ‘suited occupation’ cover (where the insurer would assess your skills, experience and education and could decline a claim if they thought you were capable of undertaking another ‘suited’ job) and ‘activities of daily living / work tasks’ (where the insurer would make you undertake functional tests like walking or getting dressed before they would pay a claim).

Read the Fine Print

When deciding which is the best Income Protection plan, it is vital for you to check the terms and conditions as there are some plans in the market that would switch from own occupation cover after 12 or 24 months of a claim (such as Legal & General if you are a manual worker and Holloway Friendly).

Which Income Protection Has the Least Exclusions?

With any good Income Protection policy, it is often the case that policies do not have any standard exclusions, which means that the insurer would payout for any medical condition that prevented you from working, irrespective of how it arose.

No standard exclusions for accident or sickness

  • Aviva
  • Liverpool Victoria
  • British Friendly
  • Exeter Family Friendly
  • Vitality
  • AIG

Some standard exclusions for accident or sickness

  • Legal & General
    Incapacity resulting from drug, alcohol or solvent abuse;
  • Aegon
    War or civil commotion.

Please note though if you travel overseas for business or think there is a possibility that you may reside outside of the UK in the future then some policies do have restrictions so please contact us so an adviser can arrange a suitable plan for you.

Redundancy insurance exclusions

Most insurers have an initial unemployment exclusion period where you cannot make a claim within the first 120 or 180 days of taking out the policy, and most plans only cover forced redundancy (i.e. you cannot take voluntary redundancy or get asked to leave due to poor performance).

Which Income Protection Providers Have the Best Payout Rates?

It is very natural to consider one Income Protection insurer as being better than another based on payout rates (i.e. the percentage of all claims that are paid).

For those insurers that do publish payout rates they tend to be very high, with most providers publishing rates that are over 90% of all claims made.

Please note that the payout rate is very unlikely to ever be 100% as there are always going to be issues with people not being truthful on their application and trying to claim for current / ongoing conditions.

Insurers
2015
2016
2017
Aegon
85%
85%
96%
Liverpool Victoria
92%
90%
96%
Holloway Friendly
96.9%
98%
96%
Shepherds Friendly
97.6%
97%
96%
Vitality Life
96%
94%
96%
Legal & General
95%
94.4%
95%
Cirencester Friendly
94%
94%
94.7%
British Friendly
97.8%
96.1%
92.4%
Royal London
94%
95.6%
92.1%
The Exeter
94%
94%
91%
Aviva
92.4%
92.6%
88.8%
Zurich
87%
85%
87%

IMPORTANT
The above Income Protection Insurance payout statistics shouldn’t be used to make an exact comparison of insurers but rather to get a general understanding of payout rates across insurers as a whole.

Making An Income Protection Claim

Paying claims is the most important thing income protection insurers can do and over the past few years, there have been a number of developments making it easier for clients to claim as well as speeding up the process of approving claims.

A number of insurers are now accepting claims over the telephone completely doing away with lengthy claims forms.

If you have an income protection policy and have suffered an illness or injury which you think will result in a claim you are best to let your insurer know as soon as possible. The sooner they can start processing a claim the quicker they can approve it and start paying your benefit.

British Friendly and Neil’s Cancer Claim…

Neil is a client of Drewberry who took out an Income Protection policy with British Friendly. He’d had his policy for just 4 years before falling ill.

After experiencing a bout of stomach pains, Neil took himself to his GP who referred him on for further tests. These tests discovered that he unfortunately had bowel cancer, and it was already at stage 2.

Neil needed surgery to remove the cancer, but developed post-operative sepsis and had to spend several weeks in hospital recovering, completely unable to work.

British Friendly began paying him a proportion of his earnings after his deferral period, allowing him to keep up with all the important bills, such as his mortgage, which he was unwell.

🤕 Read More About Neil’s Claim

Which Insurers Offer the Best Premiums?

The premiums offered by each insurer depend on a number of factors, such as:

  • Your Age
  • Smoker Status
  • Your Current Health
  • Your Occupation
  • The Level and Length of Cover
  • Deferred Period

Different insurers like different risks with some being more competitive when covering higher risk occupations or when needing a much longer deferred period.

As a result of this there is no hard and fast rule who will be most competitive particularly if you have medical conditions you need to disclose.

You can use our Income Protection comparison tool to see how much the premiums would likely cost from the best income protection insurers who will quote online. However nothing beats speaking to an expert adviser as there are some insurers who simply don’t provide online results.

Please feel free to give pop us a call on 02084327333 to gain access to all quotes that would be available to you.

Example Cost of Income Protection

In the below table, we’ve laid out the average monthly cost of a good Accident and Sickness Insurance policy as well as an option including Unemployment Insurance.

To provide you with an example cost of Income Protection, we have had to make a number of assumptions:

  • The client is a healthy and in a low risk occupation
  • They want to cover £1,500 per month
  • They can survive without an income for 8 weeks
  • They are planning on retiring at age 65
  • They would like to fix the cost of the policy with guaranteed premiums.

The Income Protection quotes detailed below represent the cheapest policy that matches the above criteria from the best income protection insurers in the UK.

Age
🚭
🚬
Accident & Sickness Insurance
Age 25 £26.77 £36.09
Age 35 £39.13 £49.58
Age 45 £56.35 £84.31
Accident, Sickness & Unemployment Insurance
Age 25 £68.47 £77.79
Age 35 £66.58 £77.03
Age 45 £100.60 £128.56

Compare 7 Best Income Protection Insurance UK

aviva

Aviva

Aviva Income Protection Solutions is the Income Protection offering of Aviva, which can trace its origins back to 1797. The company today was formed from the merger of Norwich Union and CGU PLC.

  • Cover up to age 70
  • Maximum benefit: 55% of income
  • Definition of incapacity: Own occupation
  • Deferred Period: 4 / 8 / 13 / 26 / 52 / 104 weeks
british friendly

British Friendly

British Friendly is a UK friendly society based in Bedford that was founded in 1902. Today it has more than 14,000 members and is one of the country’s largest friendly societies. British Friendly specialises in providing Income Protection.

  • Cover up to age 70
  • Maximum benefit: 70% of income (capped at £45,000 per year)
  • Definition of incapacity: Own occupation
  • Deferred Period: Day 1 / 1 / 4 / 8 / 13 / 26 / 52 weeks
cirencester friendly

Cirencester Friendly

Cirencester Friendly has been providing Income Protection for UK workers for more than 120 years. Founded as a friendly society in 1889, it today has more than 30,000 members and covers most jobs on an own occupation basis. In 2017, Cirencester Friendly won the COVER Excellence Customer Care Award.

  • Cover up to age 70
  • Maximum benefit: 65% of income (capped at £65,000 per year)
  • Definition of incapacity: Own occupation
  • Deferred Period: Day 1 or 4 / 8/ 13 / 26 / 52 weeks
Legal & General

Legal & General

Legal & General was founded in 1836 as an insurance company for lawyers. It has since expanded considerably and today has more than 10 million protection customers worldwide. Legal & General offer both long-term and short-term Income Protection.

  • Cover up to age 70
  • Maximum benefit: 60% gross taxable earnings (maximum of £200,000 per year)
  • Definition of incapacity: Own occupation
  • Deferred Period: 4 / 13 / 26 / 52 weeks
Liverpool Victoria

Liverpool Victoria

Liverpool Victoria is one of the UK’s leading friendly societies. It has around 5.8 million customers, 1.1 million of whom are members. Liverpool Victoria’s Income Protection involves a broad range of different products to suit differing needs.

  • Cover up to age 70
  • Maximum benefit: 60% of income (max. monthly benefit: £12,500)
  • Definition of incapacity: Own occupation
  • Deferred Period: 1 / 2 / 3 / 6 / 12 months
Royal London

Royal London

Royal London was founded in 1861 and became a mutual society in 1908. Today it is the UK’s largest mutual life, pensions and investments company. Royal London has long operated both the Bright Grey and Scottish Provident brands and their Income Protection offerings; between 2014 and 2016 both were rebranded to Royal London.

  • Cover up to age 70
  • Maximum benefit: 65% of the first £15,000 and 55% of the remainder, (max. £250,000 p.a.)
  • Definition of incapacity: Own occupation
  • Deferred Period: 4 / 8 / 13 / 26 / 52 weeks
Vitality

Vitality

Although only founded in 2007, Vitality has grown to become one of the country’s leading protection companies. Vitality offers an innovative approach to insurance, providing consumers with discounts if they keep up with a health and fitness regime and pass annual health checks.

  • Cover up to age 70
  • Maximum benefit: Comprehensive policies – 60% of your earnings capped up to £2,500 per month and 50% of any earnings above
  • Definition of incapacity: Own occupation
  • Deferred Period: 1 week or 1 / 3 / 6 / 12 months

The Best Way to Set Up Income Protection

When setting up your Income Protection Insurance policy you can opt to go direct to an insurer or take out cover through an intermediary. It is important to recognise the difference as one provides you with a lot more protection than the other.

  • Going Direct to an Insurer
    If you go direct to an insurer to set up your policy it is considered a non-advised sale. As you personally have made the decision to take out this policy there is no financial protection should the policy be inappropriate – the responsibility lies on your shoulders.
  • Using an Adviser
    Utilising an adviser who provides an advised sale means they are responsible for the policy they help you set up. They need to understand your circumstances fully including any existing health conditions to make sure you take out the most suitable cover for your needs. If it turns out their advice was not appropriate the responsibility sits with the adviser.

Here at Drewberry we provide a fully advised service so you benefit from expert advice and know you have that additional level of protection should something go wrong. We are proud of the service we provide and our clients think so too with 2198 independent reviews on Reviews.co.uk rating us at 4.92 / 5.

Get Expert Advice Finding the Best Income Protection

Finding the best Income Protection can be a bit of a minefield particular given the confusion that can occur with Payment Protection and the importance of getting ‘Own Occupation’ cover.

We exist to make sure you have all the information you need to make an informed decision when setting up the most suitable financial protection.

Why Speak to Us…

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.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 2455 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

We exist to ensure you have the information and the support you need when considering your financial protection.

Please don’t hesitate to give us a call on 02084327333, we are here to help.

Tom Conner
Director at Drewberry Insurance

Sam was very helpful and kept me informed at all times. Brilliant service.

Paul Williams
05/06/2019
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