Key Takeaways

  • Income protection replaces 50-70% of your income if you are unable to work through sickness or an accident
  • Income protection can be used for self-employed workers to provide a form of Sick pay
  • Policies have a deferral period before benefits kick in, this means you can have your income start when your sick pay stops.
  • Statutory sick pay is just £99.35 per week - Income protection is worth having if your bills exceed this value

What is Income Protection?

Income Protection cover protects you in the event of not being able to work. This could be due to illness, disability, or injury. It pays a regular income and continues until you are able to return to work.

The funds you receive from an accepted income protection claim can be used as you wish. Normally, funds are used for bills and the cost of living.

Income protection can be used to bridge the gap between what sick pay you are entitled to (either from the government or your employer) and the income you need to pay your bills.

The income protection cover should cover you for the amount you need to continue supporting yourself and your family.

Looking For Protection Insurance Advice?

If you're thinking about your protection insurance options and find it overwhelming, it's a good idea to seek advice.
We can help you find a protection specialist to offer you the very best advice. Complete our Sunny Fact Find form to provide us a bit more detail about your circumstances and we'll find the best-suited adviser for your needs.
Your appointed adviser will contact you to discuss how they can help, you decide how to proceed.

Statutory Sick Pay and Income Protection

In the UK, if you are unable to work through illness, injury or disability, you are able to claim statutory sick pay from the state.

SSP currently pays £99.35 per week, for up to a maximum of 28 weeks. The unfortunate reality is, due to recent inflation and cost of living increases, £99.35 per week won't go very far in supporting a family.

Income protection typically pays 50-70% of your income whilst you are off. This specific amount depends on the benefit amounts you choose when buying the policy. It can be claimed upon as many times as you need whilst the policy lasts.

Income protection for the self-employed

If you are self-employed, it is likely that you do not have sick pay through a work benefit scheme. Self-employed workers are entitled to statutory sick pay, but for most self-employed workers that amount can still leave them struggling.

Income protection can allow a way to provide further financial support for self-employed, should they fall ill, or suffer disability or an injury that prevents them from doing their job.

If your income was to stop, how would you continue to pay your bills and maintain your lifestyle?

Income Protection Deferral Periods

When you choose your policy, you agree on a deferral period.

A deferral period is the amount of time you need to wait, whilst being unable to work before the payments begin.

Generally, a shorter deferral period is suitable for people without sick pay benefits at work, whilst a longer deferral period may suit someone whose sick pay benefit ceases after 13 weeks. In this case, the deferral period could also be set at 13 weeks. Once sick pay ceases, the income protection would kick in to make up for lost income during a period longer than what your employer would support you for.

Generally, the longer the waiting period, the cheaper premiums usually are.

Is Income Protection Worth It?

Deciding if any financial product is worth it is dependent on your personal circumstances.

If you will find it difficult to maintain your bills as well as what is important to you during a period of no income then income protection could be worthwhile for you.

When reviewing policies, think about the following points:

  • What income would you be entitled to during a period of sickness?
  • What costs must you maintain? For example, Mortgages, council tax, energy bills, and food costs.
  • What happens if you cannot maintain these?
  • What savings do you have that you would be willing to use?
  • Are you happy to use these savings or did you have other plans for them?
  • What might you and your family have to give up?
  • How would your family feel about that?

Income Protection Advice

It is a good idea to seek advice about Protection insurance. An insurance adviser can help you to understand what income you would have if you were unable to work. They could help you think about what would happen to your finances and family during this period. Based on this information they would be able to make a recommendation of cover to help you maintain your lifestyle and bills during this time.

Depending on your level of savings, a loss of income could leave you unable to pay essential bills. If you are able to use savings to pay your bills, is that how you intended to use your savings? If you are self-employed, it is unlikely that you have work benefits, such as sick pay. Considering an income protection policy could help you with any financial distress you may experience should you be unable to work.

The cost of an income protection policy can vary depending on certain factors about the policy and applicant. You will be asked questions about your age, health, and occupation which can make it more or less likely that a claim would occur. You will need to decide on the level of cover you need, which will alter the deferral period, and the amount of cover needed. The more comprehensive the policy is, the more expensive it will be. The policies can also be set to a guaranteed amount, so premiums do not change over time, or standard premiums. Standard premiums can increase in line with inflation.

The income paid from PPI will only cover the amount needed to continue to make loan repayments. Income protection is used to replace income and can be spent on the cost of living and continuing to support your family and lifestyle.

Income protection can cover you if you are unable to work. If you experience an illness that prevents you from working, you will be able to claim. Some policies will cover in more detail the specific illnesses which are covered. It is important to understand the terms of your policy when you take that out

You can still be eligible for income protection insurance even If you have pre-existing medical conditions. It could be that it adds a further cost to the policy premiums or that the pre-existing condition is excluded.

Income protection will continue to pay until you are able enough to return to work. Some policies can have a maximum pay period of 5 years. It can be claimed on as many times as required until the policy ends. It is important to understand the terms of your policy, as it can differ from provider to provider.

You can claim on your income protection policy as frequently as you need to. The policy remains in place until it expires. It does not cease after one claim, like critical illness cover.

Income protection is used to protect your income in the event of illness, disability, or injury. It will not pay out in the event of redundancy or dismissal. You will need to make other arrangements to ensure you can still meet your obligations in case of redundancy.



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