Long Term Income Protection
Protecting your income with a Long Term Income Protection policy provides the ultimate reassurance and peace of mind. You can rest assured that if you cannot continue to work due to a long term illness or injury, your policy will continue to support you. It's important to find the perfect cover to suit you - our expert advisers are always on the phone to offer free advice.
Long Term Income Protection is an insurance policy which covers your income. In the event you are unable to earn a living, due to becoming ill or suffering an injury, the policy will pay a regular, tax free benefit up to a maximum percentage of your earnings, usually around 50 – 70% of your gross income. A long term policy will continue to pay out until you are fit to return to work, however long that may be, or until retirement age if you never recover enough to work again.
You can choose the term of your policy at the outset to suit you. Normally you would coincide the end of the policy with the age you plan to retire and thus when your pension would begin to pay out. So, for example if you protected your income until you are 66 years old and you became unable to work at the age of 45, your policy would continue to pay out an income benefit until you were able to return to work, or for the next 21 years until you were 66.
When you take out a policy, you agree to pay a monthly premium and the insurer agrees to pay out a monthly income benefit, should you become too ill or injured to work. Assuming you choose a policy with the ‘own occupation definition’, you will be covered for any health condition which stops you being able to fulfill your own specific job requirements.
All policies will have a ‘deferral period’- a predefined amount of time you will wait between first being off work and the policy beginning to pay out. At the point of taking out the policy, you can select a waiting period to suit your needs. Advisers can take into account any savings or sick pay benefits available from your employer, to calculate the right amount of waiting period for you. Waiting periods can be set for as short as one week. Once the waiting period has passed, the insurers would pay out your chosen monthly amount, while you are unable to do your job.
You can choose the amount of cover you require at the outset, when taking out a policy. You are able to protect a proportion of your gross income with Long Term Income Protection, not usually more than about 70%. 50 – 70% would be a typical amount – but don’t forget this is a proportion of your pre-tax earnings and the income benefit pay out is tax-free. You will also usually find that your essential outgoings would decrease if you were unable to work due to illness or injury. Your fuel or transport bill would be likely to reduce for example and exercise and leisure expenditure could cease. It is also a good idea to take into consideration your savings and how much that would help, when deciding how much cover to take out.
Monthly premiums will vary depending on a number of factors. Some of those are your choice over the level of cover you require, others relate to your circumstances and will be out of your control.
Some indicative example quotes:
= £18.89 per month premium
= £40.07 per month premium
According to the UK’s consumer champion Which? Income Protection is ‘the one protection product every working UK adult should consider buying’, however it can be overlooked and uptake is surprisingly low compared to some insurance products. If you are not sure if you need Long Term Income Protection, ask yourself the following questions:
If the answer is no, then it is worth investigating Long Term Income Protection. It is particularly important for those who:
Unlike a Critical Illness policy, there isn’t a specific list of injuries or illnesses that a Long Term Income Protection insurance policy covers. If you are unable to do your job because of illness or injury, then you should be able to claim on the insurance. This could be because of a broken leg, a sports injury, a mental illness, an operation, a back problem etc.
Some figures on claims from the Association of British Insurers:
As long as you are completely honest with your adviser and there is nothing left undisclosed when you take out the policy, there shouldn’t be any reason why it doesn’t pay out when you most need it. However, as with all insurance policies, there will be some exclusions which apply to anyone. These are likely to include injuries or illnesses caused:
If you have suffered from a medical condition previously, this could also be excluded from your policy. Each insurer has their own individual stance on how they will handle your circumstances, but if you have an existing condition, you can expect this to be reflected in the policy. You could:
It depends upon each insurer’s appetite for risk as well as your individual circumstances. It is especially important to seek professional advice in this instance to make sure you have the best value and the most complete cover.
Long Term Income Protection Insurance only covers you if you are unable to work due to medical reasons, it does not cover you if you are made redundant. There are other policies available which cover for unemployment as well.
Here at Usay Compare, we can help you to compare prices and coaver from the market leading UK health and life insurance companies such as Aviva, AXA and Bupa. Our service is completely free of charge and we are totally independent and impartial.
Our unparalleled team of friendly, expert advisers are on the end of the phone, ready to guide you easily through the whole process. They will get to know your unique individual requirements, do all the hard work comparing prices and policies for you; then advise on the best and most cost-effective quote.
Below are our in-depth guides to help you decipher the various health insurances available and learn more about how they work. Don't forget our advisers are always at the end of the phone to offer free, expert advice should you prefer to speak to someone in person.