Income Protection FAQs

19th November 2019

 

What does Income Protection cover?

You are covered for most injuries or illnesses, unlike other protection policies. The criteria for a claim within an Income Protection policy is not based on the illness/injury itself but whether it has stopped you from working.

 

Will Income Protection protect me if I can’t find a contract?

No. This is a common misconception of Income Protection; it only covers you when you are unable to work due to illness or injury. It does not cover gaps in between employment. If you’re looking for unemployment payment, you will have to apply for JSA.

 

How much of my pay will be protected?

As a Contractor, you can typically ensure between 50% – 70% of your salary and dividends.

 

What factors impact an Income Protection premium?

Your age, health, line of work and if you have smoked in the last 12 month can have an impact on your monthly premium. This is why it’s important to speak to an Income Protection expert to get a rough idea of what cover you can expect and at what cost before applying.

 

Why is it important for Contractors to have Income Protection?

When you work for yourself, you no longer have the financial support of an employer. This means that if you fall ill and are unable to work for a period of time, you do not benefit from sick pay. If this happens, how will you meet your living costs? It’s important to have an Income Protection policy in place so you can meet your living costs (mortgage, bills, food, lifestyle etc) in the unfortunate circumstance of illness or injury.

 

How long should my deferred period be?

The deferred period is the time between you being unable to work and your payouts beginning. Typically, the longer the deferred period the lower your monthly premiums. To work out the length of your deferred period, you should consider how much you need per month to cover your bills and day to day living costs and offset this against your savings. From this, you can work out how long your savings will keep you afloat before you’ll need the financial support a policy delivers.

 

What happens if I change contracts?

If your new contract pays more or less than the previous contract (or the contract you had when you started the policy), you can contact your insurer to increase or decrease the amount of cover you need.

 

How long can I be covered for?

There are two forms of Income Protection: short term – which typically covers you for 2-5 years or long term – which will cover you up until an agreed age (usually until retirement). Most Contractors take out a long term policy so that they can be confident they’ll be financially supported in the event of long term illnesses and injuries.

 


 

To find out more about Income Protection, visit this post or book an appointment with an expert adviser to discuss how you could protect you income here.

All content is accurate at the time of publication

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