Income Protection Insurance in the UK
Income protection insurance is a type of insurance policy that pays you a monthly sum when you lose your steady source of income. Most income protection insurance policies cover circumstances where you lose your job or are unable to continue working due to injury or illness.
Do You Need Income Protection Insurance?
This is a very personal decision that you might want to consider before investing. This can depend on your income and projected income for the future. Think about whether there is a possibility of losing your job. This could be due to health reasons or job redundancy. Also, consider if you could manage your expenses without a steady source of income. If yes, how long can you survive without an income?
Analysing your savings, recurring payments and expenses can give you a good idea of whether you need income protection insurance or not. This also includes projected expenses for the future, for example, mortgages and children’s education.
If you are self-employed, income protection insurance might be helpful at times when you need to take long-term breaks from work. But if you’re employed at a paying organization that provides paid leaves and severance packages, you could opt for a life/term insurance that offers better benefits than income protection insurance.
Cost of Income Protection Insurance
The cost of income protection insurance in the UK relies on various factors such as your age, marital status, lifestyle, health, profession and current income. While the cost of income protection insurance premium varies based on the insurance provider, on average, it can cost between £30-£50 per month. This also increases with your age and with the insurance coverage you would need.
Cover Provided by Income Protection Insurance
Most insurance providers offer income protection insurance of 50-60% of your monthly income or upto £2,000 per month, whichever is lower. Again, this amount is dependent on your insurance policy and is sent to your bank account each month. The payout usually begins at least 4 weeks after the claim is successfully processed. These payments are free of income tax.
In a Nutshell
Income protection insurance can be a highly beneficial product that ensures that your livelihood doesn’t get impacted by a sudden loss of income. Compare insurance policy offerings from various competitors to know the best premium rate and coverage that serve your unique self.
