Income Protection Insurance can help you financially in the event that you are unable to work or have lost income due to illness or injury. This insurance is available for most illnesses that render you incapable of working. It may be used to cover you for a stress-related condition, mental illness, or physical condition that renders you unable to work. Income Protection Insurance covers you only if your injury or illness renders you incapable of working. It does not cover you if your job is lost.
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How it works
There are many types of income protection insurance. Most are either Individual Income Protection Insurance (often known as IP) or Employer Provided Income Protection Insurance (also known as Group Income Protection, or GIP).
Individual Income Protection is for individuals who want to protect their income in case of illness or injury. You can purchase this insurance directly from an insurance provider, or through an independent financial advisor (IFA) or an insurance broker.
Employer-provided Income Protection Insurance (EPIP) is a policy that your employer takes out to protect your income in the event you become disabled or are injured.
Your employer or you can buy an income protection plan. You will receive a monthly income in the event that you are unable to work. Your employer or you will pay a monthly premium for the policy that you choose. The payout will be made after a pre-agreed waiting time.
Pre-agreed waiting periods are a common feature of most policies. This is also called the ‘deferred period’. This is the time period between your inability to work and when you begin receiving payments.
An income protection policy can help you continue to pay your rent, mortgage or bills even if you become disabled.
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Individual income protection
If you are:
- You can work full-time
- Part-time employment is possible
- Self-employed
If you have a pre-existing condition, you can apply. However, depending on the severity of your condition, insurers might charge.
They may charge you extra or apply a particular exclusion to your policy.
How do you know if Individual Income Protection Insurance is right for you? These are just a few of the things that you might want to think about:
- What would you do if your health deteriorates and you are unable to pay your bills?
- Are you a worker and do you have sick leave? How long are they paid?
- What would you do if your self-employed?
- Are you able to pay off any debts or personal loans?
Are there dependents? Do you have enough savings to pay for you and your family if you become unable to work?
Individual Income Protection Insurance products are priced based on the type of policy that you choose and your personal circumstances.
The following factors can affect how much you pay:
- Type of job
- Your age
- How much of your income do you want to be covered?
- Your health, including pre-existing conditions
- When do you want your policy ended?
Income protection provided by the employer
Group Income Protection, also known as employer-provided income protection, is insurance that employees can only obtain through their employer. This is usually part of an employee benefit package.
Employers can choose the policy that best suits their budget and business needs. The policy can be customized by employers to allow them to choose the length of the policy, whether it will be fully funded by the company or partially funded by employees, the percentage of salary that it pays out, and which employees receive it. They also have the option of limiting how much time they are off work before the income benefits kick in.
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These are the key benefits of this type protection insurance:
Individuals with pre-existing conditions are exempted from medical underwriting. They can also receive additional support.
Financial security in uncertain times, because policies pay a regular income to you if your job is not possible
You can access dedicated support through your insurance company’s Employee Assistance Programmes, as well as professional such like physiotherapists and mental health specialists.
An expert case manager will assist employees in recovering and returning to work as quickly as possible.
Employees are empowered to maintain their health and well-being by having access to preventative support services.
It is best to speak to your employer to find out if they offer this benefit, and what support services are available.
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Services to support income protection
Although the primary reason people choose to protect their income is the financial benefits, many income protection products also offer a range of additional value support. This support is provided for both employees and employers as part of the policy.