Income Protection Insurance

Income Protection Insurance

Income Protection Insurance is an insurance policy that benefits individuals should they become unable to work as the result of an accident or an illness. Should something untoward happen, income protection insurance will provide you with part of your income until you are able to start working again.

Types of Income Protection Insurance

There are a number of insurance products that fall under the umbrella category of Income Protection Insurance. The most common insurance policies include short-term income protection, long-term income protection and ASU cover (Accident, Sickness and Unemployment Cover).

Short-term income protection: this is a fully underwritten policy that has a maximum payout period which is limited between one and five years.

Long-term income protection: this is another fully underwritten policy. Unlike short-term income protection cover, this type of cover will payout until you reach a fixed age, can return to work or die.

ASU Cover: as opposed to short-term and long-term income protection policies, ASU insurance policies do not require a full medical underwriting. However, it is important to note that sometimes insurance brokers conduct an initial screening. This type of policy tends to be the least expensive income protection option because it is harder to make a claim.

In short, insurance protection insurance comes in three main variations:

  • Short-term income protection
  • Long-term income protection
  • ASU Cover (Accident, Sickness and Unemployment Cover)

Things to Look Out For

Make sure you know what your policy does and does not cover. While income protection insurance policies covers most illnesses, there are a number of situation that they do will not cover. Common exclusions include: pre-existing medical conditions, self-inflicted injuries or the misuse of drugs.

Can you afford income protection insurance? If you will be unable to pay your bills should you fall sick, you should certainly consider income protection insurance. However, if you think that you could get by on your sick pay, benefits or government benefits, income protection insurance may be a superfluous expense.

It is important that you are aware of how long you will have to wait before the policy pays out. Most policies have a minimum waiting period after you stop work before you can start claiming. Waiting periods are usually around 4 weeks.

Top Income Protection Insurance Brokers UK

Provider % of Income Covered Maximum Yearly Payout Maximum Age
Aviva 60% £180,000 54
HSBC 50% £30,000 59
Halifax 65% 200,000 63
Legal & General 65% £18,000 65
iProtect 1.00% Unlimited £1