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Income protection insurance

What is income protection insurance?

Income protection insurance is a policy designed to give you peace of mind if you ever fall ill, suffer a serious injury or lose your job. If you were ever in this position and couldn’t live off your sick pay or savings, income protection can play a huge part in securing both yours and your families future. In short, this type of policy covers you financially and ensures you continue to receive an income until you either return to work or retire.

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What types of income protection insurance are there?

(PHI) Permanent health insurance – this differs from private health insurance. PHI allows you to protect a proportion of your income. This is often set at 50% of your salary. It can pay out until you either reach retirement or choose to take early retirement. 

Accident and sickness cover – if you suffer an illness or injury resulting in you not being able to work, it will provide you with financial cover allowing you to pay your monthly outgoings until you’re fit enough to return to work. 

Unemployment cover – in the unfortunate event of you losing your job, this cover provides you with a steady income. Once you have left your role you’ll receive a tax-free monthly income.

(ASU) Accident, sickness and unemployment cover – this is a combination of all of the above. It’s a 360 degree cover that will give you total peace of mind.


How much income protection do I need?

This will depend on your personal circumstances and how much your salary is. You should add up your outgoings and be realistic about how much you need on average each month so you don’t end up under-insured. Don’t underestimate the value and take out a lower level of income protection just to keep the monthly premiums down, you’d end up struggling in the long run if you needed to make a claim. Generally, you’ll be able to insure 50% of your gross salary free of tax. You aren’t able to insure yourself for more than your gross salary because you can’t make a profit out of your misfortune should you need to claim.


Does everyone need income protection insurance?

Most people presume they only need this added level of insurance if they have children or dependants, however, this isn’t the case. If illness, injury or redundancy meant you couldn’t pay your bills and living expenses, you should seriously consider income protection insurance.

There are some instances where you might not need this type of protection. For example,

  • If you can get by on your employee sick pay benefit alone (if you have this benefit)
  • You could survive and cover your outgoings on government benefits alone
  • You have enough savings that could see you through the rest of your life
  • You have the option to take early retirement and could afford to do it
  • You have financial support from family


Self-employed income protection

Being your own boss comes with many benefits, but you don’t have the same employee rights as PAYE workers. One of the downsides to this is that you don’t receive any sick pay. If you find yourself out of work for whatever reason, you might be unable to make any money for quite some time. One way to protect yourself if this were to happen is to take out an income protection insurance policy.


How much self-employed income protection cover do I need?

It’s difficult to pin down exactly how much self-employed workers earn as business could be thriving one month but struggling the next. The best way to work out how much income protection insurance you need if you’re self-employed is to realistically value your monthly outgoings that would continue if you were out of work, such as loans, bills and rent.


How much does it cost?

There are various circumstances and lifestyle factors that will determine the amount you pay each month for your cover such as;

  • Your age
  • Your job
  • Whether you smoke or have previously smoked
  • How much percentage of your income you want to cover
  • Your current health
  • Your weight
  • Your family medical history
  • The rage of illness and injuries covered


Income protection insurance comparison

To compare income protection insurance, you need to look further than the cost of the monthly premium. You also need to compare what eventualities the insurer will payout for and how much excess you’d have to pay if you need to make a claim. At Compare by Review, we believe that the best income protection insurance isn’t necessarily the cheapest. We value product quality and customer service over the cost of policies. That’s why we recommend that you read reviews when comparing income protection insurance providers to get an idea of how well they handle claims. You wouldn’t want to be left in the wrong hands if the worst were to happen.


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Compare life insurance providers on Compare by Review today. We’re the first and only comparison site that ranks life insurance providers exclusively on customer experience and product quality rather than price. Our full table of providers will give you an impartial and unbiased overview so you can purchase life insurance from a high-quality provider that you can rely on when you need them most.


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