Income Protection Insurance
What is Income Protection Insurance?
Everyone in full-time employment is entitled to a certain amount of SSP (statutory sick pay) each year for up to 28 weeks. If the illness lasts longer, you can face a loss of income. Income Protection Insurance protects you, your loved ones and your household from financial disaster. It is constructed to pay out a regular, replacement tax-free income after a specified period, in case if you are unable to work due to illness, long-term injury or disability. The longer you defer, the cheaper the policy becomes due to the insurance company having less risk. It usually pays out until you return to work, retire, the policy expires, or die.
Income Protection Insurance enables to pay the mortgage, as well as the daily costs of living.
Do I need Income Protection Policy?
Have you ever asked yourself these questions:
" How would my life and life of my loved ones be affected if I lose my income?"
"Do I have savings I can rely on, and how long will those last?"
"Will my partner and family be able to get by without my financial support?"
"It will not happen to me" thinking is in human nature, but the sad reality is that this happens all too often. Most of us know somebody affected by a serious illness, injury or has been unexpectedly made redundant.
Being out of work for whatever reason is a stressful time. It can become even more nerve-racking with the financial worries on top.
When should I take my take Income Protection Insurance?
Before taking out Income Protection Insurance, check what cover you have through your job, as many companies will offer an element of sick pay.
The level of cover required from income protection policy varies from person to person, so after finding out what is offered by your employer, calculate your current expenditure and take out cover to meet the shortfall. Also bear in mind how long you get sick pay for, as income protection has a deferred period for paying out and the longer the deferred period, the cheaper the premiums.
If you decide to take out the insurance, it is a case of the sooner, the better, as younger and healthier individuals are offered cheaper premiums. It is also beneficial to take out a policy before there is any sign of trouble - to ensure you have the necessary cover in place should anything go wrong.
How much benefit can I receive from Income Protection Policy?
DJB Mortgages offer Income Protection from famous UK insurance providers. The maximum level of cover ranges from around 60-65% of the first £30,000 earned income per annum plus 50% of anything above this. No insurance company pays you a full salary whilst you are ill as there will be no incentive to get better and return to work.
The benefit is paid monthly and depending on the agreed terms in your policy, can start paying from day 1 or 24 months before making your claim. Our advisors seamlessly blend your work sick pay arrangements with our Income Protection package to drive down the cost of the premium for you. In short, if you are entitled to 6 months sick pay through your employer, we design a policy with a 26 week waiting period, so there is neither overlap nor deficits in your protection.
When choosing your benefit amount, we advise looking wisely at lifestyle and how much will be needed to get by as this affects the monthly premium.
How much does Income Protection Insurance cost?
The cost of Income Protection Insurance is calculated depending on individual circumstances such as:
> type of Income Protection Insurance,
> benefit amount
> excess period
> lifestyle (for example, if you have ever smoked/how many units of alcohol you consume each week, and so on),
> health (including any present or past medical conditions that you or your family have or had).
As you can see, Income Protection Insurance is a complex policy, and that is why you should always get in touch with a specialist Income Protection Consultants to obtain the right policy tailored for your circumstances.
If you have any concerns about your potential financial situation in the event of being unable to work due to illness or injury, why not contact DJB Mortgages?