Income Protection

Income Protection

If you’re unable to work, would you be able to pay your bills?

What would happen if you were too ill or injured to work? Would statutory sick pay be enough to cover your mortgage and household bills?

Currently, statutory sick pay is £109.40 per week; for many, that won’t be enough to cover their mortgage payments, household bills and day-to-day expenses such as food shopping. Or if you’re self-employed, you won’t receive sick pay from an employer and being unable to work equals you being to unable to earn.

Many of us are likely to struggle to pay the bills, mortgage, rent, food shopping and living expenses if we’re unable to work.

With that in mind, what would happen if you were off work? A few areas to think about are:

• Do you have enough savings that could be used, and would you be happy to use it?
• How long will your employer continue to pay you and for how long?
• Is statutory sick pay enough to pay your monthly household bills?
• Statutory sick pay is only available for 28 weeks, what would you do after that?

This is where an income protection policy could step in, a regular replacement income in the event that you’re too ill or injured to work. The cost of income protection will vary, depending on your individual circumstances:

• Job
• Age
• How much income you’re looking to cover
• Health
• How long do you wait before payments start to be paid

The waiting period before you get paid from your income protection insurance, commonly known as the deferred period, can be changed to suit your circumstances.

The most common deferred period is 4 weeks as people usually have 1 month’s pay before their income protection policy starts. Some employers offer sick pay benefits where they pay for 3 months for example so their deferred period may be 3 months.

Can someone who is self-employed get income protection?

As long as you pass the insurer’s criteria checks, income protection is a type of protection insurance that is popular for people who are self-employed.

The main reason why is that if they’re unable to work, they won’t be making money therefore, how are they able to pay their bills?

What’s the waiting period for an income protection policy?

Also known as the deferred period, you can typically choose from 1 day, 1 week, 4 weeks, 8 weeks and 12 weeks. This is how long you will wait before you receive your first monthly payment.

A common choice is 4 weeks as those who are employed will usually have the previous month’s pay from their employer to tide them over in the meantime. However, someone who is self-employed may choose to go for a shorter deferred period.

The deferred period will affect the price, the longer you can wait, usually the cheaper your monthly premiums are.

Run your own business and have employees?

On average in 2022, 2.5 million UK employees were signed off sick which equals to at least 5.7 days of sick days per employee.* 

An Executive Income Protection policy will pay a monthly benefit when an employee is absent due to illness or injury.

The monthly benefit will be paid to the business and it can be used to help fund the employee’s ongoing sick pay.

*Source: Ons.gov.uk – Cenus Survey 2021

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