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Income Protection Plans
An income protection insurance plan will provide you with an income should you be unable to work because of illness or unemployment. You pay monthly premiums - and then you receive cover for the period you are out of work. This cover can last up to retirement age, when you begin receiving pension payments.
The payments you receive are monthly, not a lump sum, and are limited to a % of your income, normally around 50% of your previous gross income.
Your premiums are affected by your age when you start the plan, the state of your health, and also the length of your waiting or "deferred" period. The deferred period is the time between you becoming ill or sustaining an injury and the month you are paid for. Insurers offer deferred periods of 1 month, 3 months, 6 months and even a year. The longer the deferred period the cheaper the policy is. This gives the insurer a chance to avoid payouts, as they hope that the time in which you can't work is shorter than the deferment period.
Once you start receiving payments, they will last until you have returned to normal full work (returning to work for half the pay due to the limitations of your income does not count as the end of your payout period with most insurers).
Short-term income protection (see What does unemployment insurance cover) is also an option; this may last up to an agreed term expiry (which may be 24 months or 10 years).
With long-term income protection you may make multiple claims on a policy.
There are several types of cover:
- Level benefit sees the cover level stay the same throughout the policy's term, meaning that your purchasing power of the cover decreases over time.
- Index linked benefit sees your cover level increase by an agreed percentage per annum (usually linked to RPI index). Each year the client may accept or decline the increase, however many insurance companies specify that if you decline an increase the index linking is removed from the policy .
Income Protection Insurance Uk from PremiumDoctor.co.uk
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