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What will Income Protection do for me?

Income protection insurance will pay out a monthly sum if you are incapacited by injury or illness and unable to work.

The sum paid is between 50% and 65% of your gross monthly income and the policy will continue paying this sum until you are either able to return to work again or until you retirement age; whichever is sooner.

When does my insurance policy start to pay me?

Your Income Protection can commence paying from as little as Day One and is usually designed so that your income insurance will begin paying when sick pay from your employer (if you are lucky enough to get sick pay) ends.

The length of time between your injury and when the payout begins is known as the deferment period. The deferment period in your Income Protection has a direct relation to the premium you are charged, the longer the deferment period, the lower the premiums.

How long will my Income Insurance pay out to me?

Your Income Protection policy will pay you until one of two things occurs.

Firstly it will pay until you are fit enough to return to your work whether that be a few months or 10 years. If you are unable to return to work because it is a longer term illness that you are suffering from, the second condition is true;

When you take your income protection insurance policy you will be asked for your intended retirement age or the age at which you want cover to end. Most people select between 60 and 65 however you can select as low as age 50.

The age you select here is important because this will determine how long your policy will pay you if you cannot return to work after an injury.

How much can the policy pay out each month?

Income Insurance policies are legally restricted as to the amount they can pay you whilst you are making a claim. The upper legal limit is 65% of your gross monthly income and most companies will offer to cover between 50% of your gross monthly income and the full 65%.

As with most insurance policies, the more you are covered for the higher the premiums. With this in mind it is important to remember that just because the insurance company is offering 65% doesn't mean that you necessaryily need the full 65%. You may decide that you have other arrangements in place, such as long term savings, which mean you could survive without the full amount offered to keep premiums down.

How does my sick pay from work affect my policy?

You are not legally entitled to claim on an Income Protection policy whilst your employer is still paying you. Nor are you allowed to have multiple income protection policies that cover you for more than 65% of your monthly income.

As such your deferment period (the time between your injury and the first payment from the policy) should be no less than the number of weeks of sick pay you receive from work. Taking cover with a lower deferment period may mean that you are not eligable to claim and have therefore wasted some your premiums.

Will the policy cover me if I am made unemployed?

No! Your Income Protection Insurance policy will not cover you if you are made unemployed or redundant. This type of insurance is only designed to protect your income against injury and illness.

For unemployment insurance please see our Accident, Sickness and Unemployment guide.

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