Income Protection – replaces your income if you can’t work due to sickness or injury. It ensures you continue to receive a regular income until you retire or until you can return to work. IP is not the same as critical illness insurance. Critical Illness cover pays out a lump sum if you have a serious illness. Whereas, Income Protection pays weekly or monthly tax free to replace loss of income. Depending on the insurer it is possible to cover between 50-70% of your gross salary. The amount paid to you would be free from income tax.
Income Protection policy, formerly known as permanent health insurance (PHI) helps you pay your bills. It helps you maintain your standard of living while you’re unable to work due to sickness, illness or injury for a short or long term.
IP pays out usually based on a percentage of your earnings. It also pays out until retirement, death or until you return to work. Short term Income Protection policies are also available at a lower cost. However, this policy will pay for a limited period.
Only a few employers support their staff for more than a year if they’re off sick from work. Therefore, every working adult in the UK should consider getting Income Protection. If you do not have savings nor provisions you and your family will not survive financially. You need income for your bare necessities such as, food, clothing shelter and other expenses. If you become incapacitated to work, having this kind of protection will give you peace of mind. Income Protection will cover your monthly cost in the event of loss of income.