Getting Income Protection Advice

Who Needs Income Protection Insurance?

Income Protection is designed to pay out a regular monthly income, insuring your wages in case you ever become too ill to do your job.

Accidents and illnesses are a lot more common than most of us think. According to Drewberry’s Wealth & Protection Survey…

• 2 in 5 households don’t have more than £1,000 in cash savings
• Only 6.2% of Brits have Income Protection
• 1 in 10 people say their finances are ‘hanging by a thread’.

Meanwhile, approximately 70,000 people on average are injured at work in Great Britain every year and an October 2017 government report found that 300,000 people lose their jobs each year due to mental health conditions.

For many people, savings wouldn’t last long and they’d have little to fall back on in such a situation.

Self-Employed People Are Particularly Vulnerable

Income Protection can provide sick pay for self-employed workers who wouldn’t otherwise receive anything in the way of income if they were off work other than minimal state benefits.

Without the intervention of an employer, many self employed people would be left in a difficult financial situation if they couldn’t work.

It’s here Income Protection can kick in to pay out a regular income to replace lost earnings in the event an illness or injury prevents you from doing your job.

Setting Up Income Protection

One of the main reasons why so many people use our Income Protection advice service is the large number of choices that need to be made when you take out a policy.

Facing this many choices might seem overwhelming at first, but at Drewberry our experts can help you through the process to get the best cover for your circumstances.

The Different Types of Income Protection

The first thing you will need to decide when you begin looking at policies is what you would like to have covered in your policy.

Accident & Sickness

This is a standard Income Protection policy that will cover any accident or illness that prevents you from working.

Insurance providers don’t have a defined list of conditions you can claim for – instead what you are and aren’t covered for depends on your medical history and any pre-existing conditions.

Also, with own occupation cover, you are protected should any illness or injury prevent you from being able to do your specific job.

Accident, Sickness & Unemployment

Some Income Protection policies can cover unemployment without the cause being an illness or injury.

Usually, they will cover forced redundancy and provide cover for up to 12 or 24 months allowing the policyholder time to find another job whilst still being able to meet their monthly financial commitments.

It’s important that you carefully look over protection policies that combine Unemployment Insurance with Accident & Sickness Cover.

Combined products are often not as strong on the Accident & Sickness element as a standalone Income Protection policy with separate Unemployment Insurance added on.

Michael Barrow
Independent Protection Expert at Drewberry

Moreover, Unemployment Insurance can be tricky to claim on, especially if you’re self employed or a company director, so it’s worth getting advice if this applies to you to ensure you’re taking out a policy with a realistic chance of you making a successful claim.

Your Key Policy Factors

There are a range of options to choose from that will adjust the level and cost of cover you get from your policy, allowing you to tailor your policy to meet your specific needs.

Cease Age

The cease age is the age at which your policy ends. It’s typically possible to extend your policy to a cease age of 70.

However, many people are free from major commitments before this age and often roll back the cease age to 65 or even 60 as this can offer significant savings on the cost of Income Protection.

Deferred Period

The deferred period is a decided length of time that you need to be out of work for before you can begin to claim for incapacity.

This can range anywhere from 1 day to 2 years. The longer you can wait before claiming Income Protection Insurance, the lower your premiums will be.

Premium Type

Guaranteed premiums, reviewable premiums and age banded premiums are the usual types of payment that you can choose from.

Each has a different initial cost and will alter how much you pay for your cover over time.

• Reviewable premiums
  The insurer can ‘review’ these at any time, which means that they may rise in a number of circumstances, e.g. if the insurer has seen an increase in claims or unfavourable economic factors have occurred. Such premiums usually start out cheaper but are then reviewed upwards and typically work out more expensive over the life of the policy.
• Age-banded premiums
  Also work out cheaper at the start but rise each year. Unlike reviewable premiums, however, age-banded premiums can only rise by a preset amount laid out in your policy documents. Any increases are solely linked to your age and the growing risk of you claiming as you get older.
• Guaranteed premiums
  Work out more expensive initially, but the insurer cannot adjust them over the life of the policy unless you yourself make any changes to the plan. This generally means guaranteed premiums work out cheaper over the life of the policy, especially if you take out cover when you are young and healthy, as premiums are locked in from the start and can’t change with time.

Do I Need Short or Long Term Income Protection?

This refers to the length of your claims period. The best Income Protection is long-term and has an unlimited claims period which allows you to continue receiving benefits for incapacity right up until the day your policy ends.

However, some insurers offer short-term Income Protection as a cheaper alternative, which often has a maximum claims length of 1, 2 or 5 years.

Income Protection or Payment Protection Insurance?

A lot of confusion has surrounded these two types of protection products.

Many people have assumed that these two products are the same thing. However, there are a lot of key differences between Income Protection and Payment Protection that you need to be aware of.

While one product will offer reliable protection for you and your loved ones, the other won’t cover much more than your loan payments. That’s why we’d always recommend getting advice to make sure you’re getting the right product for your needs.

Should I Index My Benefit?

If you opt for long-term cover and have many years until the policy cease age, we’d typically recommend that you index-link your Income Protection benefit to ensure that it keeps pace with inflation.

It does cost a little more, but it will ensure the spending power of your payout won’t be eroded over time.

Think of the cost of a pint of milk 20 years ago – it was much cheaper back then!

Prices naturally increase with time and, if your Income Protection doesn’t increase along with those prices, you could be left with a shortfall if you don’t adjust for inflation.

How Much Does Income Protection Cost?

The cost of Income Protection – also known as Accident & Sickness Insurance – depends on a variety of factors, which include:

• Sum assured
  The amount of income you’ll require each month from the policy
• Your age
  The older you are at the start of the policy, the higher the cost of Income Protection
• Your policy cease age
  The age at which you want the policy to end (usually at your predicted retirement age) will impact the cost of a policy, with premiums being higher the older you set this
• Any health conditions you may have
  An insurer may look to increase premiums if you have a pre-existing condition or simply exclude it outright
• Your smoker status
  Smokers are more likely to get ill, and to become seriously ill, due to the detrimental health impacts of smoking and so are charged more for Income Protection
• Your deferral period
  Similar to a car insurance excess, the deferred period reduces the cost of cover the longer you set it for; the typical length of a deferral period is usually set to how long you could sustain yourself with savings / sick pay.

Average Cost of Accident and Sickness Insurance

In the below table, we’ve laid out the average monthly cost of Income Protection. To work out the cost of cover, we’ve assumed:

• The individual is a healthy office worker
• They want a benefit of £1,500 a month
• They’re looking for an 8 week deferral period
• Their cease age will be age 65
• They’re looking for long-term cover, so they can claim right up to retirement if necessary
• They want to guarantee their premiums for the life of the policy.

The Income Protection quotes below were pulled from our instant online quote engine and represent the cheapest policy that matches the above criteria from across the entire UK market.

Comparing Income Protection Insurance Providers

There is a lot to consider when looking at insurers that goes beyond just the cost of their policies.

Some insurers offer additional benefits that can enhance your cover, for instance.

Comparing insurers can be a difficult task to tackle alone, which is why we’re here to help. As well as offering Income Protection advice, we collect and compare quotes from insurance providers to help you find the best deal for your circumstances.

Getting Income Protection Advice

At Drewberry, we offer free and impartial Income Protection advice, helping to pair you with the right protection to meet your needs.

If you’re interested in taking out Income Protection, our advisers will help you find one that suits your needs. We have access to the entire UK market, so are well-suited to search out the right policy for you.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

• There is no fee for our service
• We are an award winning 🏆 independent insurance broker who works with all the leading UK insurers
• You’ll speak to a dedicated expert from start to finish
• We are very proud of the 3900 and growing independent client reviews rating us at 4.92 / 5
• Claims support when you need it most.
• We are authorised and regulated by the Financial Conduct Authority. You can find us on the financial services register here 🧐

Given all the options and potential pitfalls it is often best to get expert Income Protection Advice.

If things are getting a bit confusing and you need some help please don’t hesitate to call us on 02084327333 or email help@drewberry.co.uk.