What is Income Protection Insurance?
Income protection insurance, often referred to as IP insurance, is a type of coverage that replaces a portion of your income if you are unable to work due to illness or injury. It provides you with a regular monthly benefit, typically tax-free, until you recover and can return to work, retire, or the policy term ends.
The Importance of Income Protection
It ensures that you can continue to cover essential expenses like mortgage or rent, utility bills, groceries, and other daily living costs, even if you can’t work.
Knowing that you have a financial safety net in place can reduce stress during recovery and allow you to focus on regaining your health.
Income protection can provide financial support for an extended period, potentially until retirement if you’re unable to return to work.
You can tailor your policy to suit your specific needs, adjusting the waiting period, benefit amount, and duration to match your circumstances.
How Does Income Protection Insurance Work?
- Policy Purchase: You purchase an income protection policy from a reputable insurance provider
- Policy Customization: You customize your policy by choosing the waiting period (the time before benefits kick in), the benefit amount (usually a percentage of your pre-tax income), and the policy term.
- Premium Payments: You make regular premium payments, which can vary depending on the level of coverage and other factors.
- Claim Submission: If you become unable to work due to illness or injury and meet the policy’s definition of incapacity, you can submit a claim.
- Claim Approval: If your claim is approved, the insurance provider starts paying you a regular income, typically monthly, tax-free.
- Recovery: You receive income benefits until you recover, retire, or the policy term ends, whichever comes first.
Selecting the Right Income Protection Policy
Choosing the right income protection insurance policy involves careful consideration of various factors:
- Coverage Amount: Determine the level of income replacement you need to maintain your lifestyle and cover essential expenses.
- Waiting Period: Choose an appropriate waiting period that aligns with your financial capabilities and any sick pay you may receive from your employer.
- Benefit Period: Decide on the duration for which you want to receive benefits, whether it’s until you can return to work or until retirement.
- Premiums: Evaluate premium costs to ensure they fit your budget while providing adequate coverage.
- Exclusions and Definitions: Understand the policy’s terms, conditions, exclusions, and the specific definition of incapacity.
Contact Us
We`re here to support you.
At the Mortgage Collective you will get a dedicated adviser that is CeMAP qualified who will help you throughout the entire process. They will take time to understand your circumstances and provide advice that right for you.
0203 923 9333
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