ncome protection protects your income and pays a monthly amount if you suffer an illness, injury or disability that prevents you from working. It can also be referred to as Permanent Health Insurance (PHI) and must not be confused with Payment Protection or Accident, Sickness and Unemployment cover.
When you consider that your most valuable asset is likely to be yourself, income protection should not be overlooked. The average worker earns their first £1,000,000 before they are 56 years and 6 months hold. Is this a sum you can afford not to protect?
You are eligible for cover if you work full or part-time and even if you are a house person. The maximum cover you are allowed does vary between insurers but is usually not more than 60-70% of your current gross salary.
The current income received from a claim is paid tax free. With most plans you will be eligible for a continued benefit if you go back to work in a reduced capacity.
In our opinion it is really important to look for own occupation income protection. This means that the policy will pay out if you are unable to do your specific job and represents the most comprehensive form of cover.
How much cover do I need?
This can depend on your aims for the policy, your current expenditure and also if you would be in receipt of any employer benefits. Plans will not be able to pay out if you are in receipt of full sick pay from your employer for example. We would tailor the plan to tie in with this so that this could not happen.
It is likely that we would look to cover as much as your income as possible, but depending on your overall protection solution it may be recommendable to purely cover your essential outgoings.
Your Kibworth Mortgages expert will be able to run through your budget with you and recommend the most suitable level of cover.
What is the deferred period?
The deferred period is the pre-agreed period of time that must elapse between putting in a claim and the benefit being paid. A longer deferred period will result in a lower premium. Your deferred period can be from as short as 1 month up to 13 months with most insurers.
If for example you receive 3 months full pay from your employer then we would look at your Income Protection paying out at the end of this period.
How can I make my plan cheaper?
Less cover is less expensive, and a longer deferred period does reduce the premium. There are also some ‘budget’ option plans available that will pay out for a maximum of 24 months rather than ceasing at plan expiry, return to work or in the event of death. These can prove to be very valuable within an overall solution to your protection needs.