Sick Pay Insurance

How Does Sick Pay Insurance Work?

After comparing Sick Pay Insurance policies and finding the right insurer for your circumstances, you’ll choose from a variety of policy options, such as a deferred period and length of the payout period. What you choose will build out your policy, and affect how much you pay.

When the policy is live, you pay a monthly premium. If you’re unwell and need to make a claim, you’ll only begin receiving your monthly benefit once your set deferred period ends. Your benefit will continue to payout until you’re well enough to return to work, reach the policy cease age, or enter retirement.

Policy Factors To Consider

Below you’ll find an explanation of the different policy factors that affect your policy coverage and monthly premium.

Length Of Cover / Policy Cease Age

This is the length of time your policy is active. The majority of Sick Pay insurers offer cease ages up to 70, but it depends on the insurer.

You will choose an end date for your policy (the policy cease age). We suggest aligning this with the age you’re expected to retire to ensure you’re protected right up until retirement. After this date, it’s typically common for people to have other means of income, such as their pension.

Level Of Cover

The level of cover refers to the sum you’ll receive each month. Most insurers allow you to protect up to 70% of your gross income, although, it does depend on the insurer. How much cover you need should be considered carefully. If you were out of work because of sickness, how much money would you need to cover your essential monthly outgoings?

Payout Period

The payout period is how long you’ll receive your monthly benefit if you’re off work.

Choose between Short-Term Sick Pay, which typically only pays out for up to 2 or 5 years per claim. Or a long-term policy, that pays out for as long as possible. This is often up until your policy cease age. Our expert advisers recommend long-term cover, as it’s more comprehensive. However, it costs more than short-term policies.

Deferred Period

Your set deferred period is how long you can survive on other financial means before your policy pays out. Some insurers refer to it as a waiting period.

Many UK insurers have deferred periods as short as one day and as long as 52 weeks. Align this with any company sick pay or other funds you have. This way if your company sick pay ends, for instance, you have a policy to protect you.

Indexation

Index-linking your policy ensure your benefit amount remains in line with inflation throughout the policy’s lifetime. This option means your benefit has the same purchasing power 20 years’ later as it did current day.

Without indexation, it’s likely your current benefit amount will not be worth the same monetary sum in the future. This could impact your affordability for living expenses and bills if you had to rely on the policy for the long term.

Including Unemployment Cover

There are some insurance providers offering Accident, Sickness & Unemployment (ASU) policies. Alongside protecting your income against accident or sickness, you’ll also be protected against unemployment. Such plans won’t cover unemployment for reasons of your own doing, like being fired for misconduct, for example.

The sickness element on these policies tends to be inferior to standard Income Protection. We recommend getting a comprehensive Sick Pay Insurance policy first. If you want to include cover for redundancy, you can then consider separate Unemployment Insurance.

Type Of Premium

Insurers offer several types of premiums. These are:

• Reviewable premiums
  Reviewable premiums enable the insurer to adjust the cost of your policy as they see fit. Common reasons for doing so are an increase in your age (putting you at higher risk) and wider economic factors, such as an increase in claims. Premiums could rise over time
• Guaranteed premiums
  Guaranteed premiums do what they say on the tin. The price is guaranteed (fixed) for the life of your policy. While expensive initially, as they won’t change over time, premiums often work out cheaper long term
• Age-banded premiums
  Age-banded premiums rise annually by a preset amount determined by your insurer. The increase is linked to your age and the increased risk of health issues as you get older.

What Does Sick Pay Insurance Cover?

Sick Pay Insurance covers you should you develop an illness or suffer an injury that prevents you from working. Your policy will cover for you:

• Accident or bodily injuries
• Periods of sickness or illness leading to sick leave from work.

Own Occupation Cover

There are several definitions of incapacity used by insurers to determine your incapability to work and your entitlement to benefits. We recommend the own occupation definition to our clients, as it offers the best chances of a successful claim. This definition means the insurer will pay out for anything that medically stops you from doing your own job.

While there are others (Suited and any occupation definitions), we avoid these as they can affect whether your claim is paid. Other definitions make it harder for you to claim, as insurers could deem you fit for another role despite your health.

Additional Benefits And Support Services

Alongside your core Sick Pay cover, most of the UK’s Sick Pay Insurance providers offer a great range of extra benefits. These aim to support your health and wellbeing. You can use them without having to make a claim. And the best bit? Most of these additional benefits are free to use.

You may find these kinds of services included with your policy:

• 24/7 remote GP services
• Medical helplines, offering quick and convenient access to advice from a medical professional
• Physiotherapy sessions, either online or in person
• Counselling sessions to support your mental health
• Hundreds of retail discounts
• Discounted gym memberships
• A hospitalisation benefit which pays out a cash benefit for each day you spend inpatient
• Second medical opinion services, enabling you to get a second opinion from a medical professional about a diagnosis or course of treatment.

Not only are these often free, your immediate family members, such as your spouse or civil partner, and dependent children, can also use them.

What Doesn’t Sick Pay Insurance Cover?

Just like other insurance products, Sick Pay Insurance has a few exclusions. These apply to all policyholders, regardless of their situation.

Your policy will not pay out for accidents or sickness caused by:

• Self harm
• Substance abuse. E.g. because of alcohol or drugs
• Involvement in criminal activity
• Foreign travel to areas of active internal conflict, high terrorism risk, political instability or countries the Foreign and Commonwealth Office (FCO) has advised against visiting.

It will also not cover:

• Pregnancy and childbirth
• HIV or AIDS
• Failure to follow medical advice.

Does Sick Pay Insurance Cover Pre-Existing Conditions?

During setup of your Sick Pay Insurance, you’ll be asked to declare any pre-existing medical conditions you have, or have suffered from in the past. Whether these are covered depends on the insurer.

Each Sick Pay cover provider has their own view of covering a pre-existing medical condition. They may:

• Cover the condition and apply standard terms (You won’t face any difference in policy price or terms)
• Cover the condition for a higher premium
• Exclude the condition but offer a date at which it will consider reviewing this
• Exclude it entirely (potentially with a premium discount to compensate).

If you’re worried about how an existing health condition may affect your policy, it’s best to discuss your options with an expert.

Our team of advisers has direct access to the underwriters at the top UK insurers. We can help you get the best possible terms for your situation. Call us on 02084327333 or email help@drewberry.co.uk.

Sophie Guiver
Independent Protection Expert

Do I Need Sick Pay Insurance?

Whether you need Sick Pay Insurance comes down to your personal circumstances. To identify if Sick Pay Insurance is the right option for you, consider:

• If and how your finances would change if you took time off work
• Whether you get sick pay from your employer
• If you have any other means of financial support
• How you would cover your essential outgoings if your income stopped.

The Risk Of Accident Or Injury

The risk of having to take time off work because of an accident or serious illness is much higher than people think. Many adults can’t imagine anything ‘bad’ happening to them, making it easy to assume you don’t need Sick Pay Insurance.

However, it’s important to remember that an unfortunate event that prevents you from working can occur at any time, to anyone. When considering Sick Pay Insurance, consider the facts:

• Over 2.6 million people were out of work due to long-term sickness in July 2023
• 23% of those aged 16-34 reported five or more health conditions in 2023.

These statistics go to show the large number of UK adults unable to work due to long-term health problems. And that no one is immune; those aged as young as 16 are tackling multiple conditions at the same time.

Could You Rely On Your Savings?

Sick Pay Insurance isn’t the only way to protect your lost earnings if you become too unwell to work. Some have enough savings to fall back on in times of need. However, very few UK working adults are in a position to save for emergencies.

In a recent Drewberry survey, we found 1 in 5 working adults would not be able to survive for longer than a week on their savings. A third of adults either have no savings or less than £1,000.

Considering the average UK household spent around £528 a week in 2022, a large proportion of people have less than 2 weeks’ worth of cash to cover their backs. This sum is likely to have increased since 2022 because of the rise in cost of living.

What Government Support Is Available?

While there are a handful of employers offering full sick pay for a specified period, this luxury isn’t afforded to everyone. You may only be entitled to Statutory Sick Pay (SSP), which pays £109.40 a week for up to 28 weeks.

If you’re self-employed or don’t meet the threshold for Statutory Sick Pay, you won’t be entitled to it. In this situation, you’d rely on Employment and Support Allowance (ESA). This benefit provides up to £90.50 a week if you’re aged 25 or above.

There are several state benefits available to those unable to work because of sickness. However, your eligibility depends on your condition and your circumstances. Even when government benefits are combined, the total sum rarely covers what a household would typically spend in a month.

Remember that average weekly spend for UK households? £109.40 is unlikely to be enough to cover your essential living expenses.

This is why Sick Pay Insurance is such a valuable form of protection, as it ensures you can cover your monthly outgoings.

Ben Brooks
Independent Health & Protection Expert

Sick Pay Insurance For Self-Employed

Many self-employed people come to us wanting to protect their income should they unexpectedly be unable to work. The nature of self employment means it’s unlikely you’re entitled to any form of sick pay from a traditional employer, such as Statutory Sick Pay.

In the event of sickness, insurance can prove to be invaluable in times of need. If you work for yourself, taking time off likely means your revenue streams stop. Self-Employed Sick Pay Insurance can cover this loss of income if you fall ill and can’t work. It’s a hugely important lifeline for many people,

It’s why self-employed people, like Mrs Mummypenny, buy Sick Pay Insurance, as it offers financial security and peace of mind.

How Much Does Sick Pay Insurance Cost?

The cost of Sick Pay Insurance depends on a variety of factors. Some you can’t control, like your age. While other policy options you can adjust to reduce costs. Insurers will take into account your age, medical history, and what you do for work, for example.

Using our Income Protection online quote tool, we’ve got some cost examples for you. These show how different factors can affect the cost of your policy.

Provider

Each Sick Pay cover provider will charge a different monthly premium. This is because each insurer has its own appetite for risk and can offer different services and benefits. So it’s always good to shop around when looking for the most suitable cover.

To show you the cost differences, these quotes assume:

• The individual is healthy and works in a low-risk office job
• The individual is 35 years old
• A monthly benefit of £1,500
• An 8-week deferred period
• Guaranteed premiums
• Long-term cover with a cease age of 65.

Different Providers
£29.32 a month	£39.28 a month

Sick Pay Insurance quotes accurate as of February 2024.

Your Age

The older you are at the start of your policy, the higher your premiums. This is due to the increased risk of sickness or injury as you age.

Below are some cost examples for policyholders of different ages. These are based on the same criteria above (except for the age changing).

Smoker Status

Smokers are more at risk of developing a health condition. Some insurers will increase your premiums if you smoke, others won’t.

Here’s an example of the difference in monthly cost between a policy for a non smoker and a smoker. This is based on the above policy options for a 35-year-old.

The Deferred Period

Insurers typically offer deferred periods of 4, 8, 13, 26, or 52 weeks. The longer this period, the cheaper your premiums because insurers don’t have to pay out immediately.

Here are some cost examples of policies with different deferred periods. These are based on the previously used policy options above.

Occupation

Some jobs are riskier than others, with higher chances of workplace injuries. Those in manual labour roles, working at heights or with heavy machinery, for example. Compared to an office worker, the insurer faces more risk providing cover to a construction worker.

We’ve got some examples of Sick Pay Insurance costs for different job roles.

Which Sick Pay Insurance Providers Pay the Most Claims?

It’s common for people to choose an insurer based on the likelihood of a successful claim. And it makes sense to think about it this way if you’re worried about claiming.

However, it’s often difficult to differentiate one provider from another in terms of payout rates. Typically, payout rates across the industry are higher than most think and also fairly uniform.

When looking at an insurer’s payout rates, it’s best to consider these as a guide. While you want to ensure a claim is successful, it’s important for your policy to suit your needs and requirements.

In this table, you can see the rates at which insurers have successfully paid out for Sick Pay Insurance claims over the last few years.

If you’re a director, you can get Company Director Income Protection. This is paid for and owned by the business.

When claiming, the insurer pays the benefit into your business account for you to distribute in a tax-efficient manner.

This policy differs from a Sick Pay plan, so it’s important to seek advice. Call us on 02084327333 or email help@drewberry.co.uk.

Danny Gill
Independent Protection Expert

Who Are The Top UK Sick Pay Insurance Providers?

As every client who comes to us is different, the best Sick Pay Insurance provider for you is specific to your needs. You might not need the same coverage as a friend or colleague, for example. Policies are tailored to your requirements.

That said, one provider may be better suited to you than another. Every provider is different, too, so it’s about matching your needs with an insurer who will address your needs and provide the right cover.

At Drewberry, we work with a range of UK Sick Pay Insurance providers, including:

• AIG
• Aviva
• British Friendly
• Cirencester Friendly
• Holloway Friendly
• Legal & General
• Liverpool Victoria (LV=)
• National Friendly
• Royal London
• Shepherds Friendly
• The Exeter
• Vitality
• Zurich.

It’s important to compare quotes to ensure you get the most competitive Sick Pay Insurance for your circumstances.

Our online quote comparison tool will do the hard work for you. Or if you need some help to compare providers, get in touch with us. Our team of expert advisers is on hand to offer advice on the right policy for you. Call us on 02084327333 or email help@drewberry.co.uk.

Compare Sick Pay Insurance Quotes & Get Expert Advice

Given there is a lot to consider when buying Sick Pay Insurance, especially if you’re self-employed, speaking to an expert is highly recommended. We provide fee-free, impartial advice and recommendations to help you make an informed decision on the best policy for you.

If you need some help to compare providers or advice on choosing the right one, get in touch. You can call us on 02084327333 or email help@drewberry.co.uk.

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
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• Claims support when you need it most.
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