Income Protection

It is common knowledge amongst IFAs that Income Protection (IP) is one of the most important types of financial protection.  Which? even said that alongside life insurance, income protection is a ‘must-have’ insurance.

The last thing you want, when off work long-term sick, is to realise that the Government or your employer isn’t going to look after as you might have assumed and that you really should’ve taken out that insurance policy you once thought about.


The thing is, most people don’t even realise proper Income Protection exists, mainly because it is rarely promoted. Think about it, when did you last see an ad on the TV or an article advertising Income Protection?

Some people worry that Income Protection won’t pay out or that it’s only for layabouts who don’t want to work.  However, the average claim length for IP with some insurers is 5-10 years.  Some of the most common conditions covered by income protection insurance are mental illnesses such as anxiety, stress or depression and back pain, non of which are going to be paid by a critical illness policy.

A lot of younger people also believe they don’t need the cover because it’s unnecessary at their current age and health.  This simply isn’t true.  In fact, the total cost of cover for many is less when you buy at an earlier age, even though you are insured for a longer period.

The maximum cover you can have is typically between 50-70% of your gross income.  However, as the benefit is paid tax free you can replace a high percentage of your income in the event of long term incapacity.

Summed up: Income Protection will replace part of your income if you’re unable to work due to ill health.  It covers essential outgoings and provides for your family.

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