A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Income Protection Insurance Jargon Buster
H
How does Income Protection work?
Being unable to work, and the loss of income that incurs, is likely
to affect your lifestyle. Income protection insurance is designed to
replace your income and reduce the negative effect of your loss of earnings.
Under an income protection policy, you pay regular premiums to an insurance
company and subject to certain conditions they agree to pay you a monthly
benefit if you are unable to work because of accident, sickness and
unemployment. Income Protection insurance polices may be offered
as Combined Accident, Sickness, Unemployment Only income protection
or Accident & Sickness Only income protection, and you may choose
dependent on your own individual requirements.
Because income protection benefits are free of personal income tax,
insurance providers offering income protection will generally limit
your benefit to an amount less than your normal earnings, in our case
up to up to 75% of your net income up to a maximum of £2000.
How do I know if I need Income Protection Insurance?
First – calculate your savings or alternative income or
additional income
Potential income sources will depend on your personal circumstances.
To find out if you might need Income Protection, ask yourself these
5 questions:
What are my total monthly outgoings ?
Estimate the total expenditure of your monthly outgoings that
should include items such as mortgage or rent, loan repayments, utility
bills, council tax, food and petrol. If you wish you may add your
insurance costs for this cover or other insurances you pay, such as
household insurance buildings insurance or motor insurance.
For how long could I survive on my savings ?
You need to realistically estimate your total expenditure and then deduct
this from any savings you may have or any other income you may receive.
Income protection insurance may be unnecessary if you decide you could
survive on your savings.
What are my benefits at work if I become sick or injured?
Your employer may continue to pay you an income for a limited
time. Some employers will only pay Statutory Sick Pay. Others
may be more generous. You should check what arrangements your employer
has made before arranging income protection insurance.
Will the state give me financial help?
State help will vary depending on your own individual circumstances
but as a general rule, if you are eligible, the government will pay
approximately £57.45 a week (over 25’s). Some of these benefits
are means-tested, and in most cases there are conditions that have to
be met, such as your having paid sufficient National Insurance contributions.
If you have had a mortgage since October 1995 help for mortgage payments
is not available for the first 9 months and then the payments will cover
the interest only, for those with a mortgage prior to October 1995 there
is no help for the first two months. How quickly could I find
work?
The answer to this will vary greatly dependent upon your occupation
and where you live.