Questions and answers for income protection cover.

Income Protection Insurance Questions and Answers

Why do I need Income Protection?

Income Protection is considered to be an important part of a well-rounded financial planning strategy. If you depend on your salary, whether to cover major commitments, such as a mortgage or school fees or simply to pay day-to-day expenses, Income Protection can help fill this gap if you can't work for health reasons. While State Incapacity Benefit can be claimed, it will only pay £70.95 per week. For someone earning £25,000 this would represent an 85% drop in income.

Why is Income Protection sometimes known as Permanent Health Insurance?

Income Protection is sometimes called Permanent Health Insurance or PHI because it gives you an income if you can't work for health reasons, such as a serious accident or illness, but it doesn't cover you for redundancy. If you need to ensure an income if you lose your job, you'll need to think about a separate Redundancy cover or Unemployment insurance.

Can I have Income Protection if I am self-employed?

Yes. If you are self-employed, the premium you'll pay and the income you'll receive is normally based on your taxable income or profits during the year before your accident or illness.

How much does Income Protection cost?

Your Income Protection premiums will depend on several things. Firstly, premiums tend to be cheaper for men than for women. Secondly, if you have a high risk occupation, with a higher likelihood of illness or accidents, such as window cleaning, roofing or the Fire Service, you might not only pay higher premiums and have more restrictions under the terms of your policy but you might be declined altogether by the insurance company.

Will I still get my Income Protection pay out if I have an income from other sources?

If you are receiving an income from other sources during the time that you can't work, your Income Protection income might be scaled down, but it depends on the circumstances. For example, if you are forced to retire early from your usual occupation and start receiving an ill health early retirement pension, the insurance company may scale down the benefits it pays out. However, if you are already receiving an income from property or investments of your own, you will probably be entitled to your Income Protection payouts in addition.