What is income protection?
Would your current employer continue to pay your salary if you’re off sick from work for more than a year?
Income protection (IP) is an insurance policy that pays out if you were sick or accidentally injured and unable to work. Hence the cover helps replace any loss of earnings due to illness or accidental injury. This cover is important for anyone of working age given the low level of state benefits available in the UK. The cover usually pays out until retirement, death or your return to work (long-term cover).
"Income Protection is one protection policy every working adult in the UK should consider (however) it is the very one most of us don't have. " (Dean Sobers, Which?)
Things to remember ...
Affordable and easy-to-arrange
Continued benefit if you go back to work in a reduced capacity, with a reduced salary
Tax free payments under the current rules, although this might change in the future
It won’t pay out if you're made redundant.
Helps replace loss of earnings due to illness or accidental injury. Payment is tax-free under the current rule.
Monthly cost depends on the kind of plan you are buying. There are commonly two types, 'own occupation' and ‘working tasks’.
Income Protection policies will generally not cover you if you are made unemployed or redundant.