Income Protection Insurance

What is Income Protection

Income Protection Insurance is an effective way to cover loss of income due to unemployment, accident and sickness.

There are several income protection insurance providers. Every insurer has a well-defined approach as to towards how much you can cover yourself for. Most insurers allow up to 50% of your gross monthly income as the maximum benefit amount, while some insurers allow up to 65% of your gross monthly income. Best Insurance offers you up to £5,000 of monthly benefit and most of our policies will allow you to cover up to 65% of your gross monthly income.

You don't have to declare any of your expenses such as outgoings towards mortgages, loans or other commitments as income protection insurance is purely income based.

Income Protection Insurance can be divided broadly into two types – Short Term Income Protection Insurance and Long-Term Income Protection Insurance.

Short Term and Long-Term Income Protection Insurance

For short term policies, the cover options you have available are:

Unemployment,

Accident & Sickness Accident & Sickness only

Unemployment only

Short term policies offer you benefit periods of 12 months or 18 months.

For long term policies, the cover options you have available are "Accident & Sickness only". These policies will offer you benefit period until you reach the age of 70 years.

Apart from the length of benefit period, the other difference between short term and long-term policies is the way they are underwritten. The short-term policies are usually underwritten only when a claim is made which means the insurer will offer you a policy without verifying any details and the policy will be offered on the basis of declarations made by you. The declarations will be checked if and only when you make a claim. The long-term policies are underwritten before you buy them and you will have to go through a detailed medical interview. Hence it is likely that the policy will not be offered immediately as the underwriters evaluate every application and approve.

Eligibility and Excess Periods

You can buy income protection insurance regardless of your type of employment ñ employed, self-employed or contract employment. The eligibility criteria differs depending on your type of employment. It is important to note that income protection policies have well defined eligibility criteria and you have to ensure that you meet all of them, failure to do so can result in the insurer not paying your claim.

The price you pay for your income protection insurance policy will also depend on the choice of excess days. Excess period is the number of days you will have to wait before you start accruing your claim. Best Insurance offers a wide range right from back to day 1 to excess of 120 days.

When should I consider Income Protection?

Income protection policies should be considered if you want to have a backup option for loss of income from unemployment, accident or sickness.

In terms of unemployment, it is quite possible that your employer may give pay you during your notice period or pay in lieu and it is also possible that you may have access to savings that you can dip into. However, loss of income puts enormous pressure and more often than not, it takes longer than estimated to find the right job. The last thing you would want to do is to accept a job offer that does not inspire you, accept a salary that you believe is not in line with your skills or competence or be forced to relocate or commute long distances. For a small amount of investment in a good income protection insurance policy, when you are made redundant, the insurer will pay you chosen amount to you month after month until you find a job that suits your requirements. Hence, not only your cash flow is taken care of but you also don't have to accept a job offer that does not inspire you or meet your requirements.

In terms of Accident & Sickness, while your employer may have sickness pay, if you check the details, it most instances it is limited to a small amount of just the statutory sick pay. It is possible that you may be in a low risk occupation or adopt all safety methods while at work. However, there is no guarantee that you will lead a life without the unpleasant situation of facing an accident or get stuck with some unforeseen illness and sometimes these may be life changing. Most of us have a friend or relative who have had to make significant lifestyle changes due to accident or sickness. It is a very lonely place to be lying at home or in the hospital, with no income and depleting savings. This is when income protection insurance will come to your rescue. For a small sum of investment, you can cover up to £5,000 per month depending on your eligibility and you can cover yourself to 70 years if you ever happen to make a claim.

We have several thousands of examples of customers who have paid monthly premiums of £40 and covered themselves for say £1,000 of monthly benefit amount. They may have had their policy for 3-4 years and would have made a claim for 6 months due to unemployment, accident or sickness. On that basis, they would have paid monthly premiums totalling to £1,440 and would have received claims of £6,000. The return on investment is a whopping 417%. If you happen to speak to one of our customers who got their claim paid, you will realise that it was not just the money but the moral support they got from their financial independence during the darkest period of their lives and the support in terms of writing their CVs or introduction to the right recruitment consultants were priceless.

Will the Government not pay me if I lose my job or have an accident or get sick?

It is a well-known fact the Government agencies are increasingly becoming stringent on benefit payments. With the introduction of Universal Credit, it is increasingly challenging to get a pay out from the Government. Most of our customers are surprised when we ask them if they know how much the Government would pay them for unemployment or sickness benefits. As of November 2017, the maximum unemployment benefit payments one can get is £71.70 per week, so just about £287 per month. The maximum disability living allowance paid is £83.10 per week which is about £332 per month. Most of our customers are also shocked that they will virtually receive no payments if there is another income in the household or if they have savings of over £16,000. Your bills such as mortgage, rent, council tax payments, utilities bills do not stop, and you get no allowance from anyone for delayed payments or payment holidays! Hence, it is a dire financial situation when someone loses their job or fall ill or have an accident resulting in loss of income. Savings, friends and family will surely be available, but the question is do you want to live in a vulnerable manner when you can set aside just £1 a day and live with the peace of mind that your basic outgoings are taken care of, should you find yourself in an unfortunate event.

If you are self-employed, run a small to medium business, it is all the more crucial that you cover your outgoings as the last thing you want is to land yourself in debts, losing your business, your credit rating and start again at the lowest rungs assuming you are fit to work.

Our trained advisors will be able to validate your eligibility, find a cover that is affordable for you and also ensure that the insurer selection and cover selection is appropriate to your needs. Speaking to an advisor helps you understand the policies better, exclusions, any special terms and conditions and the fine print! Call us on 0330 330 9465.

Eligibility Criteria for Income Protection Insurance While the exact eligibility will vary from insurer to insurer, cover type you select, your employment type and conditions, broadly speaking they are as follows:

1. You should be a permanent resident in the UK, Channel Islands or Isle of Man;

2. You should be employed, self-employed, or a contract worker, working for at least 16 hours a week within the UK, Channel Islands or Isle of Man; or working for at least 16 hours a week outside the UK, Channel Islands or Isle of Man for either:

a) Armed Forces, Civil Service; or b) a company registered in the UK, Channel Islands or Isle of Man and you are required to work within the European Union;

3. You're aged 18 or over but under 64 years old on the policy start date;

4. Immediately before the policy start date you've been working for a minimum of six consecutive months; and

5. You haven't been told by your employer, verbally or in writing, that you may lose your job or your employer hasn't formally announced a re-organisation, restructure or programme of redundancy which affects your role.

Eligibility for Unemployment Insurance With most insurers, for "unemployment" covers:

1. You will not be covered for unemployment which you've been told about, either verbally or in writing, or a re-organisation, restructure or programme of redundancy, affecting your role, which is formally announced by your employer before your unemployment cover starts.

2. You will not be covered for unemployment which you've been told about, either verbally or in writing, or a re-organisation, restructure or programme of redundancy, affecting your role, which is formally announced by your employer within the 60 days / 90 days qualifying period unless it is a policy transfer;

3. Not covered for voluntary unemployment, including resignation, or unemployment due to a disciplinary action by your employer. There are some insurers who do not exclude for disciplinary actions and will be considered on a case by case basis.

4. Not covered for unemployment caused by your employer terminating your contract within, or at the end of, your stated probationary period

Eligibility for Accident & Sickness Insurance With most insurers, for short term "Accident & Sickness" covers:

1. You will not be covered in the 12 months / 24 months from your policy start date, or the date you add accident and sickness cover to your policy, for any medical condition for which you've had symptoms, treatment or medical advice during the previous 12 months / 24 months;

2. Not covered for medical conditions such as stress, anxiety, depression or any nervous disorder, back or back related conditions, unless your condition is confirmed by a suitably qualified consultant and you remain under the continuing care of a suitably qualified consultant, or your treatment is under the direction of a suitably qualified consultant;

3. Not covered for elective or cosmetic surgery, which isn't medically necessary.

IMPORTANT: The above points are just a generalised list to help you understand the type of qualifying criteria and do not replace the policy wordings that will be provided to you when you get a quote from us.

1. What types of covers can I get with your income protection insurance? You have 3 types of covers with short term income protection policies – unemployment only, accident & sickness only and the comprehensive unemployment, accident and sickness policy. With long term policies you will be able to get accident & sickness covers.

2. How long do I have to wait before my claim is paid out? You can choose how long you wish to wait. This term is referred to as "excess period". If you choose a back-to-day 1 cover, you will be covered from the very first date of your loss of income. If you choose 30 days excess, you are not covered for the first 30 days and will be covered from day 31 onwards and you will receive your first payment on day 61. With short term policies you should be signed off or be unemployed for 30 consecutive days before you can make a claim. With long term policies having lower excess periods such as 3 days, 1 week or 2 weeks, you can get your claim sooner.

3. Am I covered for my existing medical conditions? You will be excluded for your existing medical conditions and also any medical conditions you have had in the past 12 to 24 months from making a claim. With some insurers such as L&G, you will be allowed to make a claim after the first 12 months of your policy start date and with others, it can be 24 months or not at all. With long term policies, the insurer will explain your exclusions depending on the medical interview you will have to undergo before your policy is incepted.

4. How long should I be employed for before I can take your income protection insurance? You should be employed for a minimum of 6 months and should not be signed off sick when you are buying the policy. This can be slightly lower with some insurers and hence please speak to your advisor if you have not been employed for 6 consecutive months when you are buying your policy.

5. Can I transfer policies from other providers to you? Yes you can. With most policy transfers, the waiting period will be waived off. It is however dependant on how long your existing policy has been in force, benefit amount and whether you have made any claims on your current policy.

6. How can I make sure that all the terms and conditions are provided to me before I buy? Best Insurers advisors will give limited information and provide detailed quotes by email. You should ask for IPID documents and the full set of policy wordings, read them carefully before you decide to buy.

7. Can I take two or more income protection policies? Yes you can so long as the total benefit amount of such policies does not exceed the maximum benefit amount specified by the insurers.

8. With long term income protection policies, can my benefit amount increase linked to inflation? If you would like your benefit amount to rise in line with inflation, you must seek RPI index linked policies. Such policies can be more expensive but they will ensure that you do not lose your buying power over long periods of time.

9. How long will it take to incept a short term income protection policy? Short term policies can be incepted immediately. It should normally take about 15-20 minutes for the advisors to go through all the qualifying and underwriting questions. The policies will be in-force with immediate effect.

10. How long will it take to incept long term income protection policy? With the long term policies, the advisors will initially require about 15-20 minutes to go through all your qualifying questions. The insurer will then call you separately for an in-depth medical interview which can last for about 30-45 minutes. After the medical interview, the underwriters look into each case individually and give them acceptance or highlight exclusions. You will receive a detailed quote and based on your acceptance, the policy can go live.

11. Can Best Insurance provide me a comparison of quotes? Yes, Best Insurance can provide you a range of quotes. Best Insurance also provides various options on combining covers from various providers bespoke to your requirements. Your advisor will provide you with the options and also discuss the pros and cons of each one of them.

12. Can I cancel the policy if I don't need it after a few months? With most policies, you are not tied to the insurer with any long term contractual arrangements. You can cancel your policy at any time. With some insurers you may incur a small administration fee. Please read your terms and conditions of your policy.

13. Do I need to disclose my outgoings with your income protection insurance? With income protection insurance, you don't have to disclose any of your outgoings. The advisors will ask you some of your larger commitments such as monthly mortgage payments or loan payments as it will allow them to compare a wider range of insurers.

14. Why should I buy from Best Insurance? Best Insurance is one of the largest retailers of income protection insurance which means you are buying from the market leader. You get no-obligation quotes, free information, support in selecting an appropriate policy, market comparisons and explanation of policy conditions. This will ensure that you qualify fully. All these at the most competitive price.

15. Can I include my partner as a joint policy holder? Yes with some of the short term policies you can have joint cover holders. Speak to your advisor and they will clarify whether the insurer selected for you will allow joint policy holders or not.

16. What is the initial exclusion period?

Initial Exclusion Period is an inherent feature of all income protection policies. The initial exclusion for your income protection depends on the type of cover and the insurer. Unlike excess period, you will not get a choice on the initial exclusion period. Quite simply it the period soon after your policy goes live, you will not be allowed to make a claim if you are made aware of your job being made redundant or get diagnosed with an illness that results in loss of income or an accident that results in loss of income.

For Unemployment covers, the initial exclusion period varies from 30 days to 120 days. For Accident & Sickness covers, the initial exclusion depends on your existing medical conditions or if you are taking medication or have conditions that may need medication. Essentially, the insurer will not allow you to make a claim for your existing conditions if you have a loss of income arising from them. Some insurers restrict it completely and some for a period of 12 months and some say that you should be symptom free or medication free for a period of time.

Best Insurance advisors are trained with all the market leading policies and will be able to highlight the exclusions and allow you to choose the right and cost-effective income protection insurance.

17. What is excess period?

Excess Period becomes relevant when you make a claim. It is the period in a claim when the insurer will not pay you. With most short-term policies, you will have to have a loss of income for 30 consecutive days before you become eligible to receive claim monies from the insurer. If you have chosen the back to day 1 excess period, you will become eligible to receive the claim monies on day 31. If you have chosen a 30 days excess period, then you have chosen to wait for 30 days more after the standard 31 days and hence your first payment will be due on day 61. If you have chosen a 60 days excess period, then you have chosen to wait for 60 days more than the standard 31 days and hence your first payment will be due on day 91.

For short term income protection insurance policies, you can choose between day 1 cover, 30 days excess or 60 days excess. As you would expect, the day 1 covers are more expensive than the 30 days and 60 days excess.

For long term income protection insurance policies, you can choose excess periods of day 1, 30 days, 60 days, 6 months or 12 months. The 6 months and 12 months excess periods become relevant if your employer pays you sick pay for those periods. Again as in the case of short term income protection insurance, the longer the excess periods, the lower the initial exclusion will be.

 

IMPORTANT: PLEASE NOTE THAT THESE POLICIES ARE ACCURATE ON THE DATE THESE POLICIES WERE FIRST MADE AVAILABLE HERE. FOR LATEST VERSIONS, PLEASE SPEAK TO YOUR ADVISORS.

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