Unlike a lot of the UK working population, you’ve come to the conclusion that, should you get ill and can no longer work, or do the job you currently do, or need to go long-term sick, you couldn’t get by on your sick pay.

So should life see an unfortunate change in your circumstances, what would your options be? You couldn’t survive on government benefits; you don’t have enough savings; your partner couldn’t support you; and there’s no possibility for taking early retirement; therefore, you need some sort of income protection insurance.

That, at least, is one positive decision made. However, it can be a bit of a minefield out there, in terms of finding the right policy to suit you and your family.

This guide outlines the key features of income protection insurance and answers some of the most common questions about this valuable, but less well known, product.

Speak to an Income Protection expert...

How does income protection insurance work?

Whether you’re employed or self-employed, income protection cover pays you a tax-free monthly benefit amount (after a specified waiting period) should you be unable to work due to illness or injury.

The level of cover you can secure can be up to around 70% of your gross monthly pay, replacing a proportion of your income if you become unable to work due to illness or injury. This regular monthly income can help to cover your bills, reducing financial worries and allowing you to focus on making a full recovery.

Like all insurance products, it is there to support you in your time of need and the great news is that last year, almost 90% of income protection claims were paid(1). Your insurer will be there to support you, so, long as you are completely truthful when applying for your policy.

It’s worth noting that many income protection policies also have other free services included to support your recovery and help you return to work (such as physiotherapy and counselling).

How much Income Protection Cover do I need?

This typically will depend on three main considerations:

  • What are your regular monthly expenses? Include your rent or mortgage payments.

  • How much income would you need to live comfortably each month?

  • How much employer support would you receive if you fell ill?

  • If you’re happy to use your savings if you become unable to work, how long would they last?

  • How long would you need the insurer to pay your monthly benefit for? This could be until retirement or just for a couple of years.

In terms of income, you can normally insure for up to 65% of your pre-tax salary. It’s key to not underestimate this in order to keep the cost of the premium down. You’ll therefore need to take into account whether the income payout will cover all of your essential outgoings, such as food, utility bills and mortgage.

Unsure on how much cover you need?

What about support from the government?

The reality is that, while there is some financial support in place from the government for people who are unable to work, the amount is low and the criteria to qualify is stricter than you might think.

For example, did you know that the standard allowance for universal credit for a single person over the age of 25 is only £324.84 per month? (2) It is even less for people under 25 and will also be lowered if you have savings, amongst other factors.

For the vast majority of us, it simply wouldn’t be enough to maintain our current lifestyle.

Why might you have a problem getting Income Protection?

From the point of view of the underwriters, the overriding factors are how likely is it that they will need to pay money out and how much money that is likely to be. When considering the question “when do I need income protection?” your main factor is going to be whether you need to replace income lost as a result of accident or illness.

Of course, the more likely you are to become ill or have an accident, the more you need this type of protection, however, this also correlates with greater difficulty in obtaining protection and higher premiums. Risk of an accident is increased with more dangerous professions, e.g. involving working at heights, around heavy machinery, or involving high mileage driving or heavy physical work.

For more information see - How can your occupation impact Income Protection?

It is also increased if your lifestyle involves a lot of travel or participation in dangerous sports, or if you are not in overall good health, e.g. obese, a smoker, etc.

Usually, you can still find a suitable income protection or ASU policy for your needs, but it may involve more shopping around and higher premiums than might otherwise be required.

Income Protection from leading brands

  • Zurich
  • Legal And General
  • Aviva
  • AIG
  • Beagle Street
  • LVE
  • Royal London
  • Vitality Life
  • Virgin Money
  • Budget Insurance
  • Scottish Widows

Is there a right time to take out Income Protection?

When it comes to deciding when to get income protection insurance, it really depends on your individual situation. If you want to make sure you can cover your bills and living expenses if you can't work due to an accident or illness, it's usually a good idea to get it early in life when you're healthier. This way, you're less likely to have a pre-existing condition that might not be covered.

However, the amount of your monthly income that goes towards essential expenses is also a key factor in deciding if you need income protection. If you have a high-paying job, a large mortgage, and dependents, you may need to replace a significant portion of your income if you can't work due to an accident or illness.

Even if it is just because it is your first job, still living with your parents and have no liabilities does not mean Income Protection is not appropriate. Although it may not be necessary to cover your maximum income, it can still provide a monthly sum to pay for additional treatment or provide services to help you regain fitness and return to work.

So broadly speaking, earlier is usually better. But you would need to take your own personal circumstances into account and get expert advice as to what is the best choice for you.

Do Income Protection monthly payments increase as you age?

Yes and No, the choice is yours. There are three distinct types of policy you can have, age costed, reviewable and guaranteed premium.

With regards to an age costed and reviewable policy, you will initially have a lower premium compared to a guaranteed policy but over time this will increase, normally by a set amount for age costed and more changeable with reviewable.

For each year that passes which means over time you could end up paying more for a policy. As your age increases the increases in premium each year get significantly greater and real consideration should be made as to whether this would be the best option for a long term policy.

A guaranteed premium would remain the same throughout the term of the policy so while initially a higher premium over the term of the policy is likely to cost considerably less.

While you are statistically less likely to fall ill when you are young, the level of risk to the underwriter is far greater should the worst happen.

If you are looking at short-term income protection, either to tide you over for a period of time while you adjust your finances, or a policy to cover a specific essential outgoing such as your mortgage or a loan repayment, then the cost of any pay out will be limited to the term of the policy and, as such the cost of premiums is far more dependent on your own physical fitness and health.

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How can I cut the cost of an Income Protection policy?

A full Income Protection policy will usually cover a certain percentage of your income until retirement, whilst you’re out of work due to illness or disability. The alternative is to rely on Government benefits, but depending on your circumstances at the time, you may not be eligible to receive them, and the likelihood is that they won’t cover all of your monthly outgoings.

There are various factors that can affect the cost of an Income Protection policy. You could consider a limited term income protection policy which will reduce the cost due to the Insurer paying out for a shorter period in the event of a claim. This would generally be two years rather than to retirement age.

You can also reduce the sum assured from the maximum available to the minimum you need to maintain the essential household outgoings.

Before you purchase any Income Protection policy we recommend you review your personal situation first and write down your monthly budget requirement. A robust evaluation will enable you to gauge a true picture of what you really need and this in turn could reduce your premium cost.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.

How much does income protection insurance cost?

The price for income protection insurance is dependent on a number of factors. In general, a policy will be more expensive the older you are, the more cover you take out and the riskier your occupation.

There are short term or ‘budget’ policies, where the monthly insurance benefit is only paid out for a fixed period of time, say 12 or 24 months. These policies are popular among younger people, as they are significantly cheaper, but still offer valuable benefit and peace of mind.

You may find that the cost of an income protection policy is less than you think. In fact, UK income protection insurance can cost as little as £10 a month!

So, for the price of a Spotify subscription, income protection insurance could guarantee your ability to continue paying for your actual Spotify subscription, as well as your Netflix, Amazon Prime, phone bill, BT Sport, internet and whatever other subscriptions you pay for on a monthly basis!? If you ask us, it’s a bit of a no brainer!

Speak to one of our expert advisers today to find out more about Income Protection and what options you may have.



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The advisers can also make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way. 

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