what is Income protection

We all know how important it is to insure our car, our mobile phone or our holidays. When doing this, we are ensuring that we are equipped to deal with situations that are out of our control, and are protecting ourselves from possible accidents.

We may pay a small amount each month for peace of mind and to ensure we are protected, and that we have enough money to handle the situation if anything we could not prepare for happens.

But what is Income Protection Insurance?

Income Protection Insurance basically works the same way as car insurance or mobile phone insurance – just for your wage. It provides cover if you’re not able to work and earn money due to an accident or illness. This cover will continue until you can go back to work, or if you are unable to do so, until you retire.

For just a small amount of money per month you and your family can be looked after financially, even if you are unable to work. How much insurance protection you need depends on several factors, but mainly your take home pay and how much you spend on essential bills.

What are the details?

There are many common misconceptions about Income Protection Insurance, or people tend to not think about what might happen if they become unable to work – until the occasion arises. We are here to help and give you the most important facts and details about Income Protection Insurance and plans.

How much do I get if I claim Income Protection Insurance? 

If you decide to take out an Income Protection Plan, you will not receive your entire wage if you claim.  You are likely to get about half, or sometimes two thirds of what you earned before, depending on your plan. This is because some money will be taken off for the state benefits you can claim, and also the income you get from the policy is tax free.

When can I claim Income Protection Insurance? 

You also can’t claim your Income Protection straight away if you fall ill or become disabled. Depending on the plan you choose, there will be a ‘waiting period’ before the first payment will be made. This is because you may not need the money straight away, as you may get sick pay from your employer or you may decide that your own savings will be sufficient to keep you going for a while. The choice will be yours because the longer the ‘waiting period’ the lower the premium is likely to be.

What about pre-existing medical conditions? 

With Income Protection, your insurer will ask beforehand if you have any existing medical conditions and may offer you a plan with an exclusion. This means that, for example, if you have known lower back problems, an insurer may be able to offer you an Income Protection plan, but with the provision that, if you are unable to work due to your lower back problems, the insurer does not have to pay out. Always make sure you are aware of anything an income protection policy might not cover.

How can I make a claim?

If you continue to pay your monthly premiums you can claim every time you fall ill or have an accident, no matter how many times you have claimed before.

What do I have to do?

Once you take out Income Protection with us you must:

  • Pay your initial and future increased regular monthly premiums for a specified number of years or until the plan ends. Tell us all relevant medical and non-medical information about yourself when completing your application form and when making a claim under the plan
  • Ensure you do not exceed the permitted benefit level of 70% of income from all sources and review your level of benefit if your income increases or decreases. For example, if you get a promotion or new job and your income changes, you must tell us so we can adapt the plan to meet your needs.

How is my premium worked out?

Premiums are usually worked out differently by different insurance providers. Some can consider your occupation and how at risk of injury you are. People doing heavy manual work or construction work will pay higher premiums compared to computer programmers or secretaries, and there are some occupations that insurers simply will not risk insuring. With Shepherds Friendly, there is only a small number of occupations that we won’t insure, and our customer services team will let you know from the offset.

If you have any health problems, this may also affect your premiums. If you are at high risk from staying off work due to something specific, you may get an offer of a premium with an exclusion – which we have mentioned earlier in the article. If you are offered an exclusion, make sure you understand the terms of it exactly, so you are aware of what you can and cannot claim for.

What are the risks?

The risks are similar to the risks with most insurance. If you cancel your plan you will not receive any money back. There are also risks of not receiving enough benefit if you don’t advise us when you have an increase in pay, or receiving less that was originally agreed if you do not tell us about any decreases in pay.

Some people get confused about the difference between income protection and critical illness cover. Make sure you understand the difference and full details of any financial product before opening a financial plan.

Do I need Income Protection?

If you are thinking to yourself “who needs income protection” and “why should i buy income protection“, then think to yourself, could you benefit from protecting your income if you became ill or had an accident?  If so, Income Protection could be a good option for you. No matter how much money you have paid into the plan, if you become ill you will still be covered until you get better, or until you retire.

As already mentioned, we all seem keen to insure almost everything else we care about in case something goes wrong – so why is our income any different?

Why open Income Protection with Shepherds Friendly? 

If you know how much income protection cover you need and you’re ready to apply for a plan with us, it’s simple to find out more about our Income Protection Insurance and get a quote online.

We always put our members first and, as a result, we’ve paid 95.2% of new income protection claims over the past five years. If you ever need to claim, you’ll have a dedicated claims handler throughout the process and, if required, we can refer you to specialist rehabilitation and support services to help you get back to yourself again. Plus, all members with an Income Protection Insurance plan with us get free access to Nuffield Health Benefits, including free 24/7 access to a virtual GP.

Be sure to read through our important information and key features