What is Income Protection?
Income protection is a form of insurance which can provide a regular income if you are unable to work as the result of a long-term illness or injury. Income protection typically enables policy-holders to claim between 50-70 per cent of their incomes, and these payments are tax-free. Benefits are paid either until you recover, and can return to work, or until the policy term runs out. Income protection can therefore play a vital role in enabling you to continue to support your family even in difficult times.
Do I need it?
It makes sense for most people to take out some form of income protection to guard against being unable to work for a lengthy period through injury or illness. We all tend to take our health for granted, but our ability to pay the bills can very quickly be jeopardized – along with our homes if we have mortgage payments to meet. Income protection – like life assurance – is essential for those with dependant family members. It is especially important for the self-employed, who can otherwise find themselves in greater difficulty than most.
People with employers are generally in a slightly more secure position than the self-employed. A few may even have some degree of income protection already if their employer has a group insurance policy. The remainder will usually be entitled to government funded statutory sick pay for up to 28 weeks, which will be considerably less than full earnings.