Income Protection 

Understanding income protection 

Income protection insurance is one of the most important policies available. In a nutshell, income protection protects your salary if you were to be made redundant, or to take time off work due to an injury from an accident or sickness.

 

Here are some commonly asked questions that can further aid your understanding of income protection insurance.

What is income protection insurance?

Income protection insurance subsidies your income when you are unable to work due to accident, sickness, or unemployment. As it replaces your income when you aren’t receiving it as usual, it is called ‘income protection insurance’. It’s also referred to as ‘Accident, Sickness and Unemployment Insurance’ or ‘ASU insurance’, as well as ‘long-term income protection insurance’ and ‘permanent health insurance’.

These policies will pay you a monthly amount to replace your income when you are not being paid by your work due to injury, illness, or redundancy. Income protection insurance therefore exists to give you peace of mind that your income will not cease entirely in these conditions by ensuring that you receive a regular monthly benefit until you have returned to work.

 

  • You can choose how you want to be paid: some policies pay until you reach retirement age, which means if you are unable to work and must make a claim, the claim payments will continue until your retirement age. You can also select payment periods such as 12 months, 24 months, 5 years, etc.
  • You can choose how quickly you want to be paid: This is also referred to as an ‘excess period’. The lower the excess period, the sooner you will be paid upon making a claim. You can pick 3 days, 1 week, 30 days—all the way up to 12 months. The higher the excess period, the lower your premium will be.
Eligibility criteria for income protection insurance

While the exact eligibility criteria will vary from insurer to insurer and depending upon your selected cover type, employment type, and conditions, broadly speaking they are as follows:

 

  1. You should be a permanent resident in the UK, Channel Islands, or Isle of Man;
  2. You should be employed, self-employed, or a contract worker, and working a minimum of 16 hours weekly;
  3. You should be over 18 years of age, and under the age of 64.
    What are the different types of income protection insurance?

    In our short-term range of policies, we have 3 policy types:

     

    • Accident & Sickness only
    • Unemployment only
    • Comprehensive Accident, Sickness and Unemployment policy
    Am I covered for my existing medical conditions?

    This will depend on the insurer. With some, your existing medical conditions (including conditions you have had in the past 12-24 months) will be excluded from your income protection insurance policy. With others, you will be allowed to make a claim after the first 12 months of your policy.

    For most long-term policies, you will be required to undergo an in-depth medical interview; based on your answers, your insurer will explain your exclusions.

    As part of our service, we will search the entire market for the insurance policy most befitting your needs. This includes finding an insurer that does not exclude your medical conditions, or has the least amount of exclusions if that’s not possible.

    Lump-sum payments vs monthly payments

    Income Protection insurance policies act as a replacement for your monthly income, and therefore your payments will be made monthly. If you would prefer a lump-sum payment, you should select critical illness cover.

    The downside of a critical illness cover policy is that they are based on selected medical conditions, while income protection insurance pays regardless of medical condition so long as you are unable to work.

    How long should I be employed for before I can purchase income protection insurance?

    There are no requirements for how long you need to be employed before purchasing an income protection insurance policy. The important thing is that you are not signed off sick from work when purchasing the policy; if you are, you will be unable to complete your purchase.

    Can I transfer policies from other providers?

    Yes, you can transfer your income protection insurance policy from another provider. With unemployment policies, your exclusion period may be waived off, depending on how long your existing policy has been in force and whether you have made any claims on your current policy.

    What documents and terms & conditions should I read before I buy?

    Our advisors will provide you with the required information and detailed quotes via email. You should ask for a policy summary and the full set of policy wordings and read them carefully before making the decision to purchase.

    Does my policy continue when I return to work after a claim?

    When you return to work, your policy remains as-is and no changes have to be made. This will ensure that if you’re ever in a position where you have to make another claim, the policy is there for you to protect your income.

    What is the difference between life insurance, mortgage insurance, short-term income protection, and long-term income protection?

    Life insurance covers you with a lump-sum payment in the event of your death.

    Mortgage insurance is a form of life insurance that will pay off your mortgage in the event of your death.

    Short-term income protection insurance covers you for loss of income and will pay you up to a maximum of 12 months when you make a claim.

    Long-term income protection insurance covers you for loss of income and will pay you until your retirement age when you make a claim.

    Will my statutory sick pay get deducted from the benefit amount?

    With several short-term income protection policies, there will be no deductions to your benefit amount. However, if you have a long-term income protection policy (depending on the insurer), your statutory sick pay may be deducted from your benefit amount. We can give you guidance on this when you purchase your policy.

    Do I have to pay any tax on the benefit payments I receive?

    Your benefit payments are income replacement, not earnings. As they are classified as benefit payments, they are completely tax-free; no national insurance or income tax is payable on your claim benefit payments.

    Is IncomeAdora regulated & authorised?

    IncomeAdora is the trading name of Best Risk Management and Financial Service Limited, who are authorised and regulated by the Financial Conduct Authority (FCA). Our FCA number is 583497.