income protection insurance

What is

income protection

The purpose of an income protection policy is to replace part of an insured policyholder’s income if they are unable to work through ill health, accident or are disabled. A policy will generally pay out until either the insured is well enough to return to work, the end of the policy term, or unfortunately the death of the policyholder. Equally, benefit period policies available with terms of between 1 to 5 years, these plans generally will reduce the premium costs and make income protection more affordable. However, you should note that if an illness continues beyond the benefit term, that the benefit will cease at the end of the benefit term.

Most policies will have an initial waiting period before a benefit payment is made. This is normally referred to as the deferred period. The deferred period can be tailored to fit around employer benefits and provide payment after an employer’s sick pay benefit ceases.

As an example, if an employer grants 100% pay for a period of 8 weeks in the event of sickness. Then the deferred period could be tailored to 8 weeks, so that the policy benefits replace some of the lost income.