Income protection is designed to support you financially if illness or injury stops you from working. But one part of the policy that often causes confusion is the deferred period. It can make a big difference to how well your policy actually works for you.
So, if you’ve come across this term and don’t know what it means, we’ll explain it in more detail.
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What is a deferred period for income protection?
The deferred period is the amount of time you need to be off work due to illness or injury before your payments begin. It begins from the first day you’re signed off and continues until the end of the period you’ve chosen.
It’s in place to make sure the cover only kicks in when you genuinely need long-term support. In many cases, people choose a deferred period that lines up with their employer’s sick pay or the savings they have available.
How does income protection work?
Income protection insurance provides a regular monthly payment if you’re unable to work due to illness or injury. The payments are designed to replace a portion of your income, typically a percentage of your gross salary, helping you cover essential living costs such as rent, bills, and everyday expenses.
When you make a claim, the insurer will first check that your deferred period (the agreed waiting time before payments start) has passed. Once this period ends, your monthly benefit begins and continues until you return to work, reach the end of your policy term, or in some cases, until retirement — whichever comes first.
Policies can differ in how they define incapacity. Some cover only your own occupation, meaning you’ll be protected if you can’t do your specific job, while others cover any occupation, which is more restrictive and pays out only if you can’t work in any role.
It’s not the same as critical illness cover, which pays a lump sum for a specific diagnosis. Instead, it’s intended to provide ongoing financial support while you’re unable to earn your normal income.
How does a deferred period work?
The deferred period immediately begins once you’ve been signed off from work. During this time, you won’t receive payments from your policy until the period ends. This could mean relying on sick pay, savings, or other income instead.
The length you choose has a big impact on how your policy works:
Shorter deferred periods mean you’ll start receiving payments sooner, but premiums are typically higher.
Longer deferred periods reduce your premiums because the insurer is less likely to make a payout, but you’ll need financial support to cover the waiting time.
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What’s the difference between deferred periods & waiting periods?
These terms are often used interchangeably by insurers, but there can be a subtle difference depending on the provider.
As mentioned, the deferred period is the time you must be off work before your income protection payments start.
A waiting period can sometimes refer to the same thing, but in some policies, it may also cover other types of delays, such as the time before you can make a claim after taking out the policy. It’s common with other types of protection products such as Over 50s life insurance.
The key takeaway is that both relate to how long you must wait before receiving payments.
What is a common length for income protection deferred periods?
Income protection policies offer a range of deferred periods, depending on your needs and financial situation.
Common deferred periods fall between 1-52 weeks, although some insurers may offer other lengths as well.
Shorter deferred periods, such as 4 or 8 weeks, mean your payments start sooner if you’re off work, which can be useful if you don’t have much sick pay or savings. However, shorter periods usually come with higher premiums.
Longer deferred periods, such as 26 or 52 weeks, are generally cheaper because the insurer is less likely to pay out. These longer periods work well if you have generous employer sick pay or a financial buffer to cover the first few months of absence.
Will the deferred period impact my policy?
The deferred period you choose can affect your policy in two main ways.
First, it determines how long you must wait before your payments start. You’ll need to rely on other sources of income before your policy begins to pay out.
Second, it impacts the cost of your premiums. Shorter deferred periods usually mean higher premiums because the insurer is more likely to start paying out sooner, while longer periods typically reduce your monthly or annual payments.
This is all the more reason to make sure your policy can provide cover where needed. If you don’t have support in place, setting a long deferred period could pose a risk to your finances.
Get expert advice on income protection
Income protection can be complex, but it’s designed to give you peace of mind if illness or injury stops you from working. Whether you’re self-employed or rely on your salary, our expert advisers can help you understand the right cover, deferred periods, and monthly benefit options for your needs.
There are no upfront fees to speak with our team, you can call us on
01392 436 193
(Monday to Thursday 9am – 5.30pm, Friday 9am – 5pm)
We’ll help you find a policy that protects your income and fits your lifestyle. Speak to an expert and secure your financial protection today.
