Income Protection Insurance
Income Protection Insurance
Income Protection Insurance Service
We often insure our homes, possessions, and even our lives, but many overlook one of the most important aspects of financial stability: income protection Insurance. Unlike life insurance or critical illness cover, income protection is designed specifically to replace lost income if you're unable to work due to illness or injury.
None of us know what the future holds. If an unexpected event stopped your income, how would you manage your mortgage, bills, and other monthly payments? Income protection ensures you can maintain financial stability until you recover.
How Does Income Protection Insurance Work?
Income protection cover provides financial support if you're unable to work due to illness or injury.
Policies vary, and our experienced income protection brokers will help you find the one that best fits your individual circumstances.
- It replaces a portion of your income, ensuring you can meet essential financial commitments like mortgage payments and household bills.
- If you return to work on a reduced salary, some policies continue to top up your income to ease the transition back.
What Does Income Protection Not Cover?
It's important to understand the limitations of income protection insurance. This type of policy:
If redundancy cover is something you're considering, speak with our advisors about other suitable options.
- Covers only accidents or illnesses that prevent you from working.
- Does not provide income in cases of redundancy or unemployment unrelated to health.
How Incapacity Is Defined
The definition of incapacity is the most important term in an income protection policy and the one least often read. It decides whether a claim is paid at all, and two policies at the same premium can differ enormously here.
Own occupation
pays if you cannot perform the duties of your own job. This is the strongest definition available. A surgeon who loses fine motor control is unable to be a surgeon, and a policy on this basis pays even though they could work in another role.
Suited occupation
pays only if you cannot do your own job or any other job your training, education and experience fit you for. The insurer decides what you are suited to, which materially narrows the cover.
Any occupation
pays only if you cannot do any paid work at all. This is a very high bar and rarely worth having.
Activities of daily working
disregards your job entirely and tests you against a list of functional tasks — walking, lifting, bending, writing, communicating. It is normally offered where an occupation is difficult to underwrite, and it is the weakest of the four.
Cheaper premiums are frequently cheaper because the definition is weaker. Compare on this before comparing on price.
How Much You Can Actually Insure
Income protection replaces part of your earnings, never all of them. Insurers cap benefit at broadly 50% to 65% of gross income, sometimes with a lower band applying to earnings above a threshold.
The cap exists deliberately, to keep you financially better off returning to work than remaining on claim. Because benefit is normally paid free of income tax, that proportion of gross pay often replaces rather more of your take-home pay than the percentage suggests.
For the self-employed the definition of earnings matters a great deal. Insurers will typically use net profit rather than drawings, and for company directors, salary plus dividends drawn from profits generated by your own work. Establish which figure the insurer will use before the policy is written, because discovering it at claim is too late.
Cover set against income at outset also dates as earnings rise. Some policies offer guaranteed increase options letting you raise cover after promotion or a pay rise without further medical underwriting.
Guaranteed and Reviewable Premiums
Guaranteed premiums are fixed for the life of the policy. They cost more at outset and cannot be increased by the insurer.
Reviewable premiums start lower but are reassessed periodically. Increases tend to arrive later in the term, at exactly the age when replacing the policy is most expensive and your health is most likely to have changed.
The cheaper option at outset is frequently the more expensive one over thirty years. Where a policy is intended to run to retirement, guaranteed premiums are usually the sounder purchase.
Consider indexation alongside this. A benefit that stays flat for twenty-five years buys considerably less by the end of the term, so linking cover to inflation preserves what it was bought to do.
Short-Term and Full-Term Cover
Short-term policies pay for a capped period per claim, commonly one or two years, then stop even if you remain unwell. They are noticeably cheaper.
Full-term policies continue paying until you recover, return to work, reach the policy's end date, or die.
The distinction only matters in the scenario the cover exists for. Most claims are short, and a short-term policy handles those perfectly well. But the event that genuinely destroys a household's finances is the long-term one — the condition that ends a career at fifty. That is precisely the claim a short-term policy stops paying.
Where budget is limited, a longer deferred period on a full-term policy is generally a better compromise than a short-term policy with a quick start.
Can I Combine Income Protection with Critical Illness Cover?
Yes, many providers offer combined policies that include both income protection and critical illness cover. This type of plan ensures comprehensive coverage, providing a lump sum for critical illnesses alongside income replacement for ongoing health issues.
Our advisors can guide you through these options and help you decide if combined coverage is the right choice for your circumstances. For more information, visit our Critical Illness Cover section.
Why Choose Income Protection Insurance?
Income protection is a safety net that ensures you can maintain your lifestyle and financial obligations during challenging times. Whether you're covering essential bills or planning for the unexpected, this policy provides:
At Bradgate FS we aim to make choosing and applying for a mortgage, protection, loan or insurance as stress-free as possible.
Life is full of uncertainties, but your finances don't have to be. Plan for the future today by insuring your income, so you can stay on top of your monthly outgoings while you recover. Our whole-of-market insurance advisors will find the most competitive policy tailored to your needs and those of your family.
Contact us today to secure your financial stability with Income Protection Insurance.
- Peace of mind, knowing your finances are secure if you're unable to work.
- Flexible options tailored to your specific needs and income level.
- Support for as long as you need, until you're back on your feet.
Common questions
How much of my income will the policy cover?
Most income protection policies cover a percentage of your income, typically around 50-70%, depending on the provider and policy terms.
How long will the payments last?
Payments typically continue until you can return to work or reach the end of the policy term. Short-term policies are also available if you prefer lower premiums.
Can self-employed individuals get income protection?
Yes, income protection is an excellent option for self-employed individuals who don't have sick pay or other benefits to fall back on.
Does income protection cover pre-existing medical conditions?
It depends on the insurer and the condition. Some policies may exclude coverage for pre-existing conditions. Our brokers can help you find the best option.
How soon after I stop working will the payments begin?
Most policies have a waiting period (deferment period), typically between 4 and 52 weeks. You choose this when setting up the policy, and it affects the premium.
Related
Important information
This is a protection policy with no cash-in value at any time. Cover is subject to underwriting and to the terms and exclusions of the individual policy. If you stop paying premiums, cover will end.
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