What is it?
Commonly known as IP, Income Protection can provide tax-free monthly payments to replace part of your income. These payments can help to ease financial hardship if you are unable to work.
The cover is usually paid out either until the end of the benefit or policy term, or until you are able to start working again. It is possible to claim multiple times during your policy term.
It is also possible to take out a budget form of income protection, where the payment period is limited for each claim but usually costs less overall.
Should you take it out?
Every year in the UK, almost a million people are unable to work due to serious illness or injury (ABI 2015).
With state support currently as little as £57.90 per week, some people are unable to survive on their savings and therefore may require an alternative way to pay essential bills. This is where Income Protection steps in.
How much does it cost?
The cost of an income protection policy can vary depending on various factors, such as:
- Age - The older you are, the more you will usually need to pay for income protection.
- Job - If your job involves extra risks (e.g. working at heights), you may have a higher premium.
- Occupation Definition - If you have been declared medically unable to do your own job, you will be covered if your policy covers your own occupation.
Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.