What is Income Protection?
Income Protection protects your income. If you’re off work long-term because of illness, injury or accident, Income Protection provides a monthly income to safeguard your lifestyle and provide financial security for you and your family. It will pay out your selected benefit if you are medically certified as being unable to work for as long as you are unable to work – providing you and your family with peace of mind that your financial health won’t suffer while you are not earning.
Income Protection pays out a regular cash payment that can replace up to 75% of your income (including State Disability Benefit). The premiums you pay attract tax relief at your marginal rate. The benefit is paid after what is commonly known as the deferred period (see note 1 below) which can be 4, 8, 13, 26 or 52 weeks and is payable right up to when you return to work.
Who is eligible for Income Protection?
You must be in paid work as a self-employed person, an employee or company director to qualify for Income Protection and to receive benefits in the event of a claim. Many employers do not pay you if you are out of work ill or only pay for a limited period. You should check with your HR manager to establish what, if any, benefits you have in place.
What exactly does Income Protection cover?
Income Protection provides you with an alternative income if you are unable to work due to any illness, disability, injury or sickness. You do not have to have a specific illness to make a claim, rather you will be paid an agreed monthly benefit if you are medically certified as being unfit for work after a short waiting period (referred to as the “deferred period” – see 1 below) which you choose at the outset of your plan. It pays for the duration of your illness (right up to retirement if necessary) and the cost is paid by the provider while you claim.
How much income will I get after the deferred period?
You can set the amount you want to be insured for when you take out the plan. The maximum you can plan for is usually 75% of your current income less any other income you get while out of work, such as sick pay or State Illness Benefit. The benefit kicks in after your selected deferred period which may coincide with income from your employer stopping. Importantly, the benefit will pay until you return to work or reach your selected retirement age (up to age 70).
1 – “Deferred Period” is the length of time between when the illness is initially diagnosed and when you start receiving your income protection benefit. You select how long this will be at the start of your Income Protection plan.