Income Protection Insurance is a form of insurance policy, which is designed to provide financial assistance to someone who is rendered unable to work for an extended period due to disability or illness. The money paid out by this form of insurance is entirely tax-free and, if you take out an Insurance Protection policy that you subsequently need to draw on, it will pay out a proportion of your earnings until you are either able to return to paid work or you retire. The purpose of this type of insurance cover is to provide longer-term protection to those who are placed in a vulnerable position due to being unfit for work.

Why should you consider Income Protection?

Many people will feel that taking out an Income Protection policy is superfluous, particularly if they already have critical illness cover. However there are key differences between these types of insurance – principally in the length of time that they last. Should someone suffer long-term illness – for example, paralysis that left him or her unable to do their job – this would not be covered by a critical illness policy. Furthermore, Accident Sickness Unemployment cover would offer financial protection for the initial period that they were in hospital, but would not continue beyond that point. Income Protection Insurance will provide you with financial security for as long as you require it. There are a number of other medical conditions that are not covered by Critical Illness policies – such as mental health issues – that also make considering an Income Protection policy worthwhile.

How does it work?

Income Protection works in a similar way to most other forms of insurance, with premiums being paid on a monthly basis, but there are factors that will help to determine exactly how steep a person’s premium will be. The first of these is age – with older people paying larger premiums as they are considered at higher risk of illness. Another contributory factor is that of a person’s health at the time of taking out the policy, as obviously someone with a history of illness may either be refused a policy or asked to pay a higher premium. Then there are the issues of the job and hobbies a person has, as the level of illness or injury risk these carry will also have an effect on how high their premiums are. Finally there is the matter of the waiting period: Income Protection carries a delay before paying out to claimants, but the claimant can choose the length of the waiting period. The longer waiting period they opt for, the lower the premium will be.