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Income Protection Insurance CoverIf you were prevented from working for a longer period of time because of illness or injury, how would you manage your finances and the loss of your income? Unfortunately the bills continue to come, and outgoings like the mortgage, costs of daily living, and other financial commitments still needs paying.
Income protections is one solution and is an insurance policy designed to protect your family should you be unable to work because of long term illness or injury. Statistics show that around 2.4 million people receive incapacity benefit, which means the likelihood of this happening is probably greater than most of us think.
Income Protection Insurance in the UK provides a number of benefits, but the key benefit is protection for up to £120,000 or 60% of gross annual earnings each year, or whichever the lower is. This figure can change between the different Insurance Providers, and so check the key facts illustration you will receive once you have received your quotes.
When applying for an Income Protection Policy you will need to select a deferment period. This deferment period is the amount of time that you will need to be unable to work, by way of illness or accident, with typical deferment options being 4, 8, 13, 26 or 52 weeks. When selecting your deferment period, the longer the period the cheaper the Income Protection Cover becomes.
When selecting the longer terms of deferment it is worth checking with your employer how much sick pay will be received, and for how long.
Bear in mind also that a payment protection insurance policy is often used to cover the deferment period. These policies are also known as ASU or Accident Sickness and Unemployment policies, and typically pay our for a maximum of 12 months, and up to £1500 or £2000 per month maximum dependent on individual circumstances.
The amount of cover is dependent on your age, health, type of occupation and your expected retirement age, as well as the level of cover required.
Is Income Protection Insurance right for you?When reviewing whether Income Protection Cover is suitable for your needs, the following questions may be useful. Do you have family responsibilities
- Are you a homeowner who needs to protect mortgage repayments
- Do you have regular monthly commitments, such as credit card or loan payments, and what about the council tax and other bills
- Are you self employed and totally dependent on working to generate enough income to cover your living expenses.
- Even working full time maintaining a household, would you need help in the event of a period of incapacity