Which is the best income protection insurance?

Looking for the cheapest income protection insurance can be a daunting task, we listen to your needs and present the right policy for you whether it be for an individual policy or group policy. Without income protection in place how quickly would this affect your family or families of your employees if they are unable to work. Take the worry away and avoid spirally debts and adverse credit.

What is income protection?

One of people’s biggest worries is not being able to pay their bills if they are unable to work due to an accident or illness. This is especially true in the current climate with the ever-increasing cost of living.

One of the ways that you can protect yourself from this is by taking out an income protection policy. This way, you’ll receive a regular, tax-free replacement income, enabling you to pay your bills. This leaves you safe in the knowledge that you and your family will be financially secure whilst you are unable to work.

How does income protection work?

Income protection policies pay out a set amount (usually between 50 – 75% of your salary) once you have been out of work for a set amount of time.

The waiting period between you becoming unable to work and the policy beginning to pay out is known as the deferral period and can be set from anywhere between one and 12 months. The longer you set the deferral period, the cheaper your premiums tend to be. This means that if you have savings, you could use these initially and then set a longer deferral period to reduce your monthly premiums. Or, if your employer offers full sick pay for the first six months, you could set your income protection policy to kick in after this point.

Once your income protection policy begins to pay out, it will then run until either you return to work, retire, the policy expires, or you die.

How much does income protection cost?

Income protection premiums are usually based on a number of factors such as:

• The amount of cover
• The deferral period
• Your age
• Your health
• The type of job you have. For example, the riskier your job, the more likely you are to have time off

Therefore, a higher earner will pay more for their income protection as the policy will pay out a percentage of their salary in the event of accident or sickness.

Do I need income protection?

If you are worried about paying your bills if you can’t work for a sustained period of time, then an income protection policy may be for you.

Before taking out a policy, it is worth checking the terms of your employment. This is because many employers offer sick pay, life insurance and some even offer income protection as a benefit, so you may already have the cover you need. It is important to check through the details of your cover carefully, as many sick pay policies will only pay your full pay for six to 12 months. After this point, you may only be entitled to statutory sick pay.

You should also check any other policies you have in place as well, such as critical illness cover or mortgage protection. If you already have these in place, you may not need an income protection policy as well, also remember once your in a position to claim it maybe to late, so speaking to Woodward Financials for a protection review is worth the call.

What types of income protection are available?

Generally, there are two main types of income protection policy:

• Index linked: this type of policy will rise in line with a measure of inflation each year, such as the retail prices index (RPI) or the consumer prices index (CPI). This ensures that your income protection payments keep pace with the cost of living.
• Stepped benefit: if, for example, your employer pays you full sick pay for a set period of time and then it reduces, stepped income protection could be useful for you. This type of policy allows you to choose two levels of payment, which pay out at different times. In practise, this means that while your employer is paying you full sick pay, you could receive a lower payment. Then, when your employer reduces your sick pay, the benefit your policy will pay you increases.

Things to consider before taking income protection

Income protection isn’t right for everyone, but it may be a good option for you if:

• Your savings couldn’t support you for the long term.
• You are the main earner of the family and would not be able to cover your essential outgoings in the event of you being unable to work for a sustained period of time
• Your employer does not offer sick pay or if it only provides you with sick pay for a short period of time
• if government benefits would not be enough to support your standard of living

Woodward Financials were awarded best wealth management firm in 2021 and again in 2022 and have a team of advisers ready to help you answer these questions and guide you through the right income protection policy for you. Being independent Woodward Financials also search the whole market to get the best solution and the cheapest price.

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