Income Protection Insurance and Income Insurance Product Guide

In todays busy lifestyles it is far to easy to be suddenly struck by an accident which puts you out of action for a lengthy period of time. It is another sad fact that your employer may not provide as much sick pay as you'd have liked and help from state benefits is minimal. Statutory Sick Pay is paid at £79.15 per week (From April 2009 - March 2010) and you may even find that you are not eligible to claim that!

A vast majority of people would find it difficult to survive on Statutory Sick Pay alone and would find it extremely difficult to pay the bills, keep the mortgage going and put food on the table. Plus with government moves to reduce the number of people able to claim incapacity benefit, you may find that in the long term things could get even worse!

Income Protection Insurance (also know as Permanent Health Insurance, PHI or Income Insurance) offers a solution to these problems and provides a tax free monthly income if you are suffering from an incapacity which prevents you from working. This monthly income would be paid either until you were fit enough to return to work or until your selected retirement age if you are unable to return to work before that age.

The actual premium you pay for Income Protection Insurance takes into account a number of different factors including:

• Amount of Benefit Required
• Deferrment Period (How long you want to wait before the policy starts paying)
• Your Occupation
• Your Age when you take out the policy
• Smoker Status
• Estimated retirement age
• Health and Medical History

Each of these factors will have a direct effect on the premium that each insurance company offers you. For instance, as with most types of insurance, your age and sex have a fundamental effect on how likely you are to make a claim in the eyes of the insurance company.

Affect of Occupation on Income Insurance

Occupation is the factor which in most cases can cause the biggest variances in premiums. Because Income Insurance is directly related to you been able to work, the type of job you have has a large effect. If you are in an administration type position you are naturally less likely to injure yourself than if you worked in the construction industry for instance.

Thats not to say that working in the construction industry means you won't get income insurance at a reasonable price. It simply means that you need to do more hunting around. For those with more hands on positions it is generally a good idea to take advice on your needs. A trained advisor will be able to advise which insurance companies are better suited to your specific occupation.

How long should I wait for my Income Protection payout?

The length of time you wait between having an accident and receiving your first payment from your Income Protection Insurance can have a large effect on the premiums offered to you. This period, known as the deferrment period, is usually offered at a 4, 8, 13, 26 or 52 week interval and is usually designed to match your sick pay provision from work.

Along with your employers sick pay, you should also take into account any savings you may be willing to use or other forms of income you might have if you were to be incapacitated. The longer you can stretch the deferrment period, the lower the Income Insurance premiums become but you need to reach a comfortable position where you would be able to sustain yourself and your family for the deferrment period whilst being able to afford the premiums.