Many of us would struggle to keep on top of our essential outgoings, such as mortgage and rent, if we lost an income due to illness or an accident. Income protection is a long-term insurance policy that makes sure you get a regular income until you retire or can return to work. Find out how does it works, when you need it and what you need to think about when buying it.
Income protection insurance:
- provides regular payments that replace part of your income if you’re unable to work due to illness or an accident
- pays out until you can start working again – or until you retire, die or reach the end of the policy term – whichever is sooner
- typically pays out between 50% and 65% of your income if you’re unable to work
- covers most illnesses that leave you unable to work – either in the short or long term (depending on the type of policy and its definition of incapacity)
- can be claimed as many times as you need to while the policy lasts.
There’s often a pre-agreed waiting (‘deferred’) period before the payments start. The most common waiting periods are 4, 13, 26 weeks and a year. The longer you wait, the lower the monthly premiums.
It’s not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness.