Life can be unpredictable, and depending on your line of work, if illness or injury stops you from working, your income can change overnight. That’s where income protection insurance comes in. Offering a financial safety net when you need it most. We are specialised in helping people with income protection. We’re here to help – give us a ring and let’s talk through your options.
Understand How You’ll Be Assessed
The definition of incapacity is one of the most important parts of your policy. It determines when you can make a claim based on your ability to work.
- Own occupation: Pays out if you can’t do your specific job. This is the most comprehensive and flexible option and offers the highest level of protection.
- Suited occupation: Pays only if you can’t do a job suited to your skills or experience.
- Any occupation: Pays out only if you can’t do any job at all – the strictest definition and often hardest to claim against.
Choose The Right Deferral Period
This is the waiting period between when you stop working and when your payments begin. Common options include 4, 8, 13, 26, or 52 weeks. A longer deferred period usually means lower premiums, but you’ll need other financial support to cover the gap. Look at your sick pay or savings buffer and see how it lines up.
Check How Much You’ll Be Paid
You can usually insure between 50% and 70% of your gross income. Payments are tax-free if you’re paying for the policy personally. This ensures you can still cover essential bills like your mortgage or rent, food, and utilities, even while off work.
Decide Between Short-Term or Long-Term Cover
- Short-term cover: Pays out for a maximum of 1 or 2 years per claim. It’s more affordable but offers less long-term security.
- Long-term cover: Continues until you return to work, retire, pass away, or reach the end of your policy term – usually around age 60 or 70.
Should Your Cover Rise with Inflation?
Many policies offer the option to index-link your cover, meaning your benefit will rise each year in line with inflation… maintaining your income’s real-world value over time.
Understand the Premium Type
- Guaranteed premiums: Stay the same unless you make changes.
- Reviewable premiums: Can be changed by the insurer, often every 5 years.
- Age-banded premiums: Rise gradually as you get older.
Watch out for Exclusions
Pre-existing conditions may not be covered, and some policies have exclusions for mental health issues, back pain, or pregnancy-related conditions.
Additional Considerations
- Rehabilitation support to help you return to work.
- Waiver of premium, which means you don’t pay while claiming.
- Guaranteed insurability, so you can increase your cover if your circumstances change (e.g., getting a mortgage or starting a family).
Still unsure? A financial adviser can help match your needs and budget with the right level of cover. Give us a call – we’re happy to help.
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