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Income Protection

A comprehensive guide on income protection

What is income protection?

Income protection insurance does as its name suggests. If you have to take off work because of illness, an accident or lose your job (and it wasn’t your fault), this insurance will pay you an agreed upon income every month.

The payment you receive is there to cover your bills and regular payments until you get back to work. You choose in advance how much of your salary you wish to be paid if you need to claim, which is typically 50% of your normal monthly wage.

If you’re fired or deliberately harm yourself and therefore are unable to work, its unlikely you’ll be paid out.

Working with an Independent Qualified Advisor

Although the agreement is between you and the insurance underwriter, it's often common and beneficial to work with an Independent Qualified Advisor, who will act on your behalf to find the best deal on the market for your circumstance. The advisor will act as a bridge between you and the underwriters, so they will ask you the questions required by the underwriter to generate a quote. The advisor will be rewarded by getting a pay-out from the underwriter, often there would be no cost to you for the use of their service and you get the benefit of their access to the whole market, which won’t be accessible to you without them.
Find out more

Steps to taking out income protection

01
Fill in a web application

Fill in a web application

02
Speak to an independent advisor

Speak to an independent advisor

03
Find a product that works for you

Find a product that works for you

The cost of income protection insurance varies in every case.

Your Age


As with all insurances, the premiums you pay directly relate to the risk the insurance provider takes in covering you. The older we get, the more likely we are to get ill and so the greater the monthly premium.

Your Health


Health is another factor that can’t be ignored by insurance providers. If you are healthy and fit then, the cost will be lower. Your insurance provider will take a look at your medical history before they give you a quote for your plan.

Your Job


Did you think of this one? Probably not, but you need to remember that the kind of job you do is really important when it comes to the cost of an insurance policy. If you have a risky job that can damage your health or put your life in danger then the cost will be higher.

Waiting Period


Most income protection policies will start to pay you after 4 weeks, however, it could take much longer (up to 2 years in some cases). Insurers know that you may receive sick pay from work and so build this into their policies. If you’d like immediate payouts you can pay extra for this on your policy.

Lifestyle and Hobbies


This is something you will have to inform your insurance company of. They will do a background check on you before giving you a quote. If you smoke or drink heavily then you are at risk of getting ill and so your premiums will be higher.

What are the different types of income protection?

When it comes to income protection insurance you need to decide if you want to cover a specific payment or debt (i.e. your mortgage) or if you want to cover your salary.

• ASU protection (accident – sickness – unemployment) covers your salary as explained above. If you’re off work then a portion of your normal salary is paid to you. You can choose how much of your salary you’ll get when you take the policy out
• If you want to cover specific loan repayments or other debts you can take out a PPI policy (payment protection insurance). This will pay the repayments for you whilst you are off work, normally for 2 years or until you return
• Finally, you can choose to cover your mortgage repayments with MPPI although this typically only lasts for 12 months or until you return to work

There’s of course nothing stopping you from having multiple policies to cover different debts, repayments or your salary. These are all short term policies, designed to cover you until you return to work, with cover from a week up to 2 years. There are other longer-term policies available as well, for example;

• 'Own occupation' will cover your salary in the event of an accident or illness where you cannot do any part of your job. However, the cover is more comprehensive than ASU particular and so the premiums are higher
• 'Suited tasks' only pays out if your employer cannot find other roles for you and so it is generally cheaper

How to identify the level of coverage you require?

This can be a tricky business as you might not be able to understand at first how much coverage you require.

• You have to start by evaluating how much your take-home pay is.

• Then take away the amount that you get in-state benefits.

• Furthermore, you will take away any costs that are related to work such as your travelling cost, food, and clothing.

Now you need to add any extra expenses that you might have to deal with in case of illness or disability. This could include a doctor’s fee, medicines, extra energy use at home and so on.

You’ll be aiming for a figure that will allow you to live in the event of accident or illness, in lieu of your monthly salary. It can be difficult to work exact figures out so consulting a qualified insurance advisor is always best

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