Income protection is an often-overlooked member of the personal insurance family. While most people have life cover, and most have at least heard of critical illness, many are unaware of the benefits an income protection policy can offer.
Long term illness can be devastating for a family’s finances, but income protection can provide a degree of security should the worst happen.
This short guide to Income Protection covers the following:
- What is income protection
- When would it pay out
- How long does it last
- What are the options
- What does it not cover
- How can I set it up
- Tax benefits
Risk considerations & points to note:
There are a number of risk considerations to be aware of as noted below. It’s important you are aware of these as appropriate to your circumstances.
- Application for cover is personalised, is occupation based and medically underwritten, so:
- Failing to disclose (& honestly) any requested or relevant information (including medical history information) may adversely affect any future claims you might make.
- Cover is only maintained whilst premiums continue to be paid.
- The benefits are selected at outset when the policy is written.
- Over time, changes in your circumstances or inflation may mean the original cover is insufficient for your needs.
- Cover levels should be periodically reviewed to ensure they remain sufficient
- The policy has no cash value at any time.
- There is normally no continuation option at the end of the selected policy term. So, once the term is reached, cover will cease.
- The maximum benefit payable has to take into account any benefits which would be paid under any waiver of premium benefits written into other policies. So, if you have a waiver of premium benefit (also known as contribution protection benefit) to cover payments on other policies/plans, this/these would be deducted from the maximum benefit payable on an income protection policy.
- The payment of any benefits may affect your claim to means tested benefits.
- The payment of any other payments, such as sick pay, may have an impact on the benefits payable.
- The level of benefit may be reduced if you receive other regular income, such as salary/reduced salary or pension income.