Income Protection Cover

Yes, income protection used to be known as permanent health insurance or long-term disability insurance and is designed to support you if you can’t work because you’re ill or injured at some point in the future.

It replaces part of your income if you can’t work for a while because you’re ill or disabled. It pays out until you can start working again or until you retire or the end of the policy term whichever is sooner. There’s a waiting period before the payments start. You generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you wait, the lower the premiums.

Income Protection is not the same as critical illness insurance, which pays out a one-off lump sum. Income protection insurance pays a percentage of your gross salary or take-home pay (you can decide how much – usually set at about half or just over), and you can claim as many times as you need to, while the policy lasts.

It’s not the same as short-term income protection, which also pays out a monthly sum related to your income, but only for a limited period of time (normally between two and five years) and usually covers fewer illnesses.

It covers most illnesses that leave you unable to work – but whether that means ‘unable to work at your current job’ (perhaps due to work-related stress) or ‘unable to work at all’ (perhaps due to a serious heart condition) depends on the type of policy you choose and the definition of incapacity in your policy.

Usually your policy comes with a list of specific illnesses or situations it won’t cover, called exclusions. These may include one or more of the following:

• pre-existing medical conditions (any illness you already knew about when you bought the policy)
• normal pregnancy
• self-inflicted injury
• disabilities or illnesses that are due to criminal acts
• misuse of alcohol or drugs
• disabilities or illnesses if you are involved in war, riots, invasion, or terrorism

If you have existing health problems or a dangerous job you might not be able to get cover at all.

It doesn’t matter whether or not you have children or other dependents – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.

You’re most likely to need it if you’re self-employed or employed and you don’t have sick pay to fall back on.

You also need to be sure you can keep paying the premiums, which can be expensive. You need to set your premiums at a level you can afford to balance your current budget against the peace of mind that having income protection cover gives.