Income insurance would act as a safety net if you were to become a victim of redundancy or if you became incapacitated as the result of an accident or sickness. You would be eligible to make a claim on the policy once you had suffered from one of the events for a period of time. This would generally be within the region of 30 to 90 days. Your benefit would then continue providing your income for either 12 or 24 months depending on the provider and then they cease.

The amount of income you would be entitled to each month would be the sum you chose to protect of your monthly income. Of course all providers will set a limit to this amount so you would have to read the small print. Generally providers will allow you to insure up to £1,500 or half of the gross monthly income you bring home whichever was the least amount. If you were then to suffer from one of the events you have chosen to protect against you would have money towards whatever essential outgoings you had to keep up with.

Do bear in mind that 90 days can be a long time to wait before seeing any replacement income and debts could have built up by this time. Also take into account that a policy paying out over 24 months would cost more than one paying over 12 months.
You could choose to take out income insurance to provide a replacement income for redundancy and incapacity in one policy.

You would then have the security of being able to make a claim if you suffer from either of these events. Alternatively if it suited your needs better you could just take out cover for unemployment alone or incapacity alone. Also check the small print to see if your chosen provider gives carer cover in their policy. A generous provider will include this which means that if a close family member should suffer incapacity you would be able to take care of them and the policy would provide your chosen income.

If you do not have protection to fall back onto then along with recovering or searching for work you would have the worry of where to find money each month for your outgoings. You could have to rely on being eligible to claim an income from the State.

State benefits can be a letdown as they often do not produce the income that you used to bring home. This again could leave you struggling with the little money you were entitled to and have to juggle it around. If you have life savings then you might consider using these if you should lose your income. However it could take many months before you had found work or had recovered from your illness or accident and your savings could have run dry before this time. With income insurance tucked away you would know how much money you would see from the cover, when you could make a claim and for how long you would be able to rely on benefit.

One of the biggest benefits to having income insurance behind you is of course the money the policy would supply if you suffered from a loss of income. Redundancy can happen and often with little warning, accident and sickness can also occur at anytime. Both of these events could be insured against with a policy or you could choose to just protect against one or the other individually, based on your needs.

An income insurance policy could be taken with a specialist provider and by doing so you can shop around and compare the cost of the policy. You can also compare the benefits such as when you could claim and for how long. To take out a policy you choose the amount of your income you want to protect. This amount is agreed by the provider and is the sum given back each month over the term. The income is tax free and would begin once the deferment period passes which would generally be in the region of 30 to 90 days. Your policy could supply an income that continued paying out for 12 months or some providers offer 24 monthly payments.

If you were taking out cover that paid out for 24 months then you could expect to pay out more in premiums. You would also need to take into account that 12 months can be more time than is needed for you to have gone out and found work or to have made a recovery. However the policy would cease when its term had been reached whatever your circumstances at the time.
If you have income insurance behind you then you would not have the worry each month of where to get a substantial amount of income so that you can maintain your outgoings. Your outgoings would of course depend on your lifestyle but generally all households have utility bills and rent/mortgage to maintain each month. Of course you will also have a food bill each month and all of these outgoings are of course a necessity. Without money to maintain these outgoings life would become extremely difficult and you could have to consider making some very drastic cutbacks just to try and find the money for these. If you could not maintain your rent or mortgage repayments each month then you would be looking at arrears and these could lead to you eventually losing your home if you cannot catch up on the missed payments. A policy could make your life less stressful as you would know how much replacement income you had coming in and for how long.

Anyone imagining the worst disaster that could happen to their personal finances is likely to include somewhere along the line the sudden and unexpected loss of their normal income from work. With the income safely in the bank each month, it is possible to pay the mortgage or rent, utility bills and a pile of other household bills. When that income fails to arrive, all manner of problems begin to pile up – unless, of course, you have taken the prior precaution of investing in income insurance.

This is a simple, straight forward and modestly priced financial product that provides a regular, replacement monthly income when the one from work is unexpectedly lost. Insured benefits are paid directly to the policy holder and can be spent in exactly the same way as the normally earned income, and come with the added advantage of being completely tax-free. The replacement income, therefore, can be used to make the mortgage repayments, pay the rent, the utility bills or any other household expenses. In short, they can help to head off an otherwise inevitable spiral into unmanageable debt.

Income insurance offers a particularly sound way of tackling the most common reasons for the temporary interruption of a regular income. An accident or an illness, for example, can leave the victim needing several months off work in order to recover. Unless the employer operates an unusually generous sick-pay scheme, then the pay from work will sooner or later run dry. This is a fate that will strike immediately, of course, in the case of redundancy. In any of these circumstances, however, income insurance will ensure that there is a standby replacement income paid every month – generally for up to a year, if necessary – until the policy holder is well enough to return to work or has found a new job.

The typical maximum of 12 months payment of such a replacement income is usually enough to see policy holders back on their financial feet once again, but it is also a way for insurers to offer this sort of insurance at a surprisingly low cost in premiums. The maximum duration of such payouts naturally helps to limit the potential liability taken on and this can be reflected in the way in which premiums are calculated. For those looking for a looking period of comfort, however, some income insurance policies offer the option of extending the maximum payout period to up to 24 months, for which an additional premium is payable.

When it comes to determining the level of replacement income that will be necessary in the event of temporary incapacity or unemployment, the choice is very much up to the policy holder when setting up the insurance. The calculation is likely to take into account the cost of the monthly premiums (invariably quoted in terms of each £100 of income insured), the likely duration of the absence from regular employment, and the ongoing, regular financial commitments of the individual concerned. Whilst the individual is free to choose to receive benefits that will be used as an all-purpose, general source of income, to be spent exactly as the one from work, it is also possible to limit the cover to such essential bills such as the monthly mortgage repayments or those on any other borrowing or credit. At a stroke, therefore, the same insurance can be described as income insurance, mortgage insurance or loan insurance respectively. In any event, the maximum level of cover generally available will be up to a typical maximum equivalent to 50% of the policy holder’s normally earned income, or £1,500 a month, whichever is less.

There are also circumstances in which the usual package of risks covered by most income insurance policies can also be varied. Instead of a complete package covering accident, illnesses and unemployment, for example, it might be sensible – and will certainly be cheaper in terms of the premiums payable – to restrict cover against either unemployment or incapacity, rather than both. For example, the individual’s employer might run a perfectly acceptable and sufficient sick-pay scheme that would make further cover against incapacity unnecessary; alternatively, it could be that a particularly generous redundancy package has already been negotiated between the employer and employee representatives, so that further unemployment insurance is unnecessary and only the risk of incapacity has to be covered. Income insurance offers the flexibility to cope with any of these situations.

Some people might think that income insurance is only available for those earning above a certain amount each year or limited to those employed in particular professions. This is not the case and eligibility for this type of insurance is drawn very widely indeed. In fact, it is also available for the self-employed. All that needs to be demonstrated is that the proposed policy holder is currently working (and not off sick) at the time of the proposal for cover and has been regularly employed (or self-employed) for at least the previous six months. Residence must be in the UK, Channel Islands or Isle of Man and, of course, the policy holder needs to be available for work (and not retired, for example) throughout the insured term.

When cover is being sought against unemployment, there must be no redundancy notice already served or imminent and the self-employed subsequently claiming under the unemployment terms of the insurance will need to show that they have ceased trading altogether and not simply going through a “lean patch” in their business. No medical examination is generally required, although pre-existing medical conditions are likely to be excluded from any subsequent claims.

A recent innovation is the introduction to some income insurance that also covers time taken off work in order to provide full-time care for an immediate family member, thus removing the obstacle that most people would face in wanting to provide this sort of attention for a loved one in need. It works in just the same way and entertains claims in just the same manner as though the policy holder him or herself were incapacitated for normal work, with the same typical maximum of 12 monthly benefit payments up to the permitted maximum level of cover.

Income insurance could provide you with essential repayment peace of mind as it is protection against the possibility of you losing your income to redundancy or incapacity. You can take protection against both events together or you could choose whether to protect just against the chance of losing your income to unemployment alone or take cover for incapacity alone depending on your needs.

How much you will pay for insurance would depend on the provider you had chosen to take your cover from. Independent providers will base the premiums on the level of cover you want to insure, your age when you apply for protection and the amount you choose to protect of your income. This amount would then be the sum of money that you would get back if you should have to make a claim due to one of the events you had chosen to insure against. There will be a period of time that you would have to be unemployed or incapacitated before being able to make a claim on the policy and this is generally between the 30th and the 90th day. However some providers will offer to date back the protection to the first day that you lost your income to redundancy or incapacity so it is worth checking this before taking on the policy. Once you have begun to receive your income you would then receive payments for so many months which would usually be between 12 months and 24 months. After the term of the cover has been reached it would ceases regardless of your circumstances at this time. However it could be more than enough time for you to have searched for work and found a job or for you to have recovered from your accident or illness.

Your standalone provider will usually offer you the option of choosing the level of income insurance most suitable for your needs. You could take out protection against the possibility of losing your income just to unemployment or you could choose just to take your policy as protection against incapacity alone.

The money you get back, if needed, from your income insurance policy would go towards you being able to maintain any essential outgoings that should come your way. You could choose to use the income as you wished just as you would your own income.

This means you would have money to ensure that the family were kept warm and food remained on the table. Of course there could also be many more essential repayments that would need maintaining and with the income from your policy to fall back onto you would have the money to be able to do so. Without a policy to fall back onto you could have a struggle on your hands to be able to maintain your repayments. Even if you should make the most drastic of changes in order to be able to maintain your bills as they came into the home, could still find yourself juggling them around and eventually fall behind on the repayments. In which case your life could become extremely difficult at a time when you need to be concentrating on making a recovery or searching for work.

Income insurance is security for your essential outgoings against unemployment and incapacity. You can choose to cover both events together or you can choose just to protect against the chance of incapacity alone or take unemployment protection alone.

To take out income insurance you would have to decide on the amount of your income that you want to protect. There will be a limit set by the provider as to how much you could insure and this might vary so checking is essential. The amount pre-agreed with the provider when getting your quote is the sum of money that is paid back as a tax free replacement for your income if you are unlucky enough to become a victim to one of the events covered. Of course you would need to have been unable to work or have been unemployed for a certain period of time before being able to make your claim. This will generally be between the 30th but can be up to the 90th day with some providers offering to date back the cover to the first day of your redundancy or incapacity. Following the onset of your income some providers will continue paying for 12 months while others might offer 24 months of protection.

With the income from the policy you would not have the worry of where you would find money to meet all of your outgoings. Depending on your lifestyle these could include such as utility bills, phone bill, rent or mortgage repayments and your monthly food bill. Of course you could have different needs and you would be able to use your replacement income in any way you wanted.

When considering taking cover you would have to check the limitations as there are some in any type of insurance policy. In the case of payment protection it is the exclusions which have to be checked against your current lifestyle. While income payment protection is a very good way against protecting against the unknown, it is not suitable for all individuals. If you are self employed you would need to check the limits, the same would apply if you suffered an illness that was ongoing.

Income insurance could well be a more reliable form of backup plan to rely on that risking using savings. Your savings could run dry before you got back to work or had time to secure another position. This could again leave you struggling to find the much needed money when bills needed paying. State benefits are another possibility that many relay on but which could also be a letdown. You would have to prove eligibility and often even if you are eligible to claim from the State for unemployment or incapacity the money you are entitled to would nowhere near match your own income.

It’s enough to make anyone take cover – the increasingly high risk of being made redundant in today’s decidedly uncertain economic climate or the absences from work and consequent loss of an income through the “traditional” curses of accidents and illnesses. Income cover, though, can be just that – a safe, secure and reliable way of ensuring that, even when calamity strikes, there is a regular, replacement monthly income on hand to continue to pay the bills and allow you to lead a more or less normal life until the worst of the temporary misfortune is over.

Income cover can be arranged by almost anyone with a regular income to protect. To be eligible for this type of insurance, the proposed policy holder simply needs to be in regular employment (or regularly self-employed) and to have been similarly employed for at least the previous six months prior to the start of the cover. A resident of the UK, Channel Islands or Isle of Man, the proposed policy holder will also need to remain available for work (and not past retirement age, for example) throughout the period covered by the insurance.

Formally styled as income payment protection insurance, this form of income cover will guarantee a regular, replacement monthly income if the policy holder loses his or her normally earned income because of an accident or illness or if they are made compulsorily redundant. With benefits paid free of tax, the income can be used just as the policy holder chooses and provides the perfect cover from which to ensure that all the essential bills and expenses continue to be paid even though the income from work has been temporarily suspended.

For the cover to come into full effect, the policy holder needs to complete a given “waiting” period – or “qualifying period” as it is frequently more formally called – in order to establish a sufficiently prolonged absence from work to incur a financial loss. The qualifying period can be as short as 30 days or it can extend to as long as 90 days (or even longer) depending on the particular policy. Upon completion of this period, the insured benefits become payable either on the immediately following day or – in the case of more generous policies – are backdated to the first day on which the policy holder was absent from work or involuntarily unemployed.

Once in payment, however, the benefits continue to provide income cover every month that the policy holder remains incapacitated or unemployed, or for up to a typical maximum of 12 months, whichever is least. The typical duration of the cover raises a number of points, perhaps the most important of which is that this type of income cover is designed to provide short- to medium-term relief rather than long-term or indefinite income replacement. The latter – in the form of critical illness insurance, for example – is certainly available, but the cost of premiums is considerably higher. Where shorter-term income cover turns up trumps is providing a highly affordable variety of security. Because the maximum duration of payable benefits is limited, insurers are much better able to manage their potential liabilities and, thus, keep premiums as low as possible. Even so, for policy holders who fear that a 12-month maximum might prove too short a payment period, some policies offer the option of extending this to 24 months, on payment of an additional premium.

Whether the choice is for a maximum of 12 or 24 monthly payments, however, premiums will be quoted on the basis of the price per £100 of income insured and this will be the amount that is paid in benefits – free of tax – each month that the policy holder is incapacitated or unemployed. The maximum amount of cover that can be arranged in this way is generally related to the policy holder’s normal income from work and is typically the equivalent of 50% of the normally earned gross salary, or £1,500 a month, whichever is less. In other words, the insurance can generally provide a more than comfortable canopy under which to take cover when misfortune strikes.

As already mentioned, those most common misfortunes are usually grouped together as accidents, illnesses and unemployment – indeed, the insurance is often described as accident, sickness and unemployment insurance, or just ASU insurance for short. Nevertheless, there is no requirement to take cover against all three risks, when protection against one or two might suffice. If you already enjoy the benefit of a guaranteed redundancy package in the event of enforced unemployment, for example, it can be possible simply to arrange standalone insurance against just accidents and illness. On the other hand, if your employer runs an adequate sick-pay scheme, you might only need unemployment cover. Restricting the risks against which you are seeking income cover will, of course, significantly reduce the premiums you will need to pay.

The insurance providing this kind of income cover is getting more and more flexible all the time. One of the latest refinements of its core principle is the extension of income cover to those policy holders who need to take unpaid leave from work in order to provide full-time care for an immediate member of the family. There are policies that recognise that this can be an essential part of many people’s life and that the principal barrier to their being able to provide the care and attention the family member deserves is the probably loss of vital income from work. Income cover provides the wherewithal to put the concerns for a loved one first and the job in second place.

In summary, therefore, income cover provides an extremely valuable means of preparing for a working future made uncertain by accidents, sickness and unemployment. By providing a safe and reliable refuge, however, it can also grant the individual the freedom to look after a close relative in times of their greatest need. It is a flexible for of insurance, available to practically anyone in current employment and the monthly premiums remain remarkably affordable.

If you sit down and work out just how much of your monthly income goes on outgoings you might see why considering protecting your income should be considered. With income insurance you could insure up to so much of your own income against the chance of falling sick, suffering an accident or being made redundant. If you then fall victim to one of the events you would get an income back, tax free. You would receive this income back each month after the deferment period, for the term of the policy which would vary depending on the provider.

Outgoings could be in the form of utility bills for heating and lighting. They might also come in the form of loan repayments, home shopping debt, and mortgage or rent for your home and of course your family food bill. These are just some of the many essential outgoings that you have to maintain each month to ensure life is comfortable, to keep a roof over your head and to ensure you keep out of debt. You would be able to spread out the replacement income that you gained from income insurance as you wanted, as it would be your income.

Without a policy to fall back onto your unemployment or incapacity could be a great deal harder to manage than it need be. Even if you should make some drastic cutbacks to the way you live these could all be in vain and you could still find you have no money for bills. A policy could change this and the substantial sum of money gained from it would go a long way towards providing you with peace of mind. This would allow you to concentrate on making a full recovery and get back to work or allows you time to search around for work.

Income insurance taken with an independent provider would lead to the best savings. The premiums would vary and along with this so would the exclusions. These exclusions would have to be compared and checked against your circumstances if you wanted to ensure that you would be eligible to put in a claim. Along with income payment protection you could also consider one of the other forms of payment protection. Loan protection does not provide the same freedom as income cover as it would only allow you to insure a portion of your loan repayment. However if loan repayments are a major concern then it could be worth considering. Mortgage protection is also a valuable form of cover as this policy would supply you with an income to meet your monthly mortgage repayments. All forms of payment protection can be taken as insurance for unemployment and incapacity together. However you could also just choose protection against unemployment alone or take out incapacity cover alone.

Income insurance pays your bills when you have lost your job or are too sick to
work.

Many banks, building societies and credit companies offer income protection cover when you sign up for a loan, finance, credit or store card.

Taking the cover is optional – but before signing up, work out what you want from income protection.

Monthly benefits

This is the monthly benefit the protection cover pays out. Cover comes in to two types:

• Debt specific: which is a policy linked to a finance agreement, like a car loan, mortgage or credit card. Debt specific means the cover only pays out to cover the repayments linked to the finance agreement, and generally they go directly from the provider to the finance company.
• Non-debt specific: This is general payment protection cover anyone can take out, providing they meet the qualifying criteria. This also pays a monthly benefit, but the money is not linked to any particular loan agreement, so you make the decision how to spend it.

Cheap payment protection

Generally, it’s cheaper for most people to have a single non-debt specific income insurance with a standalone provider rather than take out a plan each time a finance agreement is signed for a number of reasons:

• It’s easier to manage one plan
• The policyholder has financial control
• Standalone providers often charge less for cover than a finance company

Working out the cover

Payment protection should cover all your important financial commitments. Paying these keeps your credit record clean, takes a way the threat of losing your home and reduces stress so you can concentrate on finding new work or recover fully from an accident without the worry of how to pay the bills.

The provider generally charges cover as an amount per £100 of cover.

For example, if you want to cover monthly bills of £850, the monthly premium – the amount paid to the provider – would be 8.5 x £amount of cover per £100.

To calculate how much income insurance is required, list your monthly outgoings like mortgage, rent, council tax, utilities, loans, credit cards and food.

Claiming

Different providers have different rules about claiming on payment insurance.
Most have a qualifying period that the policyholder has to sit out before receiving any money. This is generally 30 days, but can be 60 days or longer.

Policies pay out on:

• Accidents– if you have an injury as the result of an accident that prevents you from working
• Sickness – if you are in poor health from a condition that has developed since you took the policy out.
• Unemployment – only if you are involuntarily made redundant or under special rules if you are self-employed.

Income insurance does not pay out for self-inflicted problems like drug abuse, alcohol abuse, taking voluntary redundancy or walking out on your job.

When you are all at sea, facing wave upon wave of steadily rising debt, income insurance can throw a desperately needed lifeline. The normal round of household bills, expenses, including regular debt and credit, is just about manageable so long as there is the normal pay packet to depend on at the end of the month. But such a regular income is by no means certain. In many cases, prolonged time off work to recover from an accident or illness can mean reduced sick pay or no income at all. For an increasing number of people in the coming few years the spectre of redundancy looms all too probably. That will mean a period of unemployment whilst a new job is found.

Deprived of a regular monthly income for any of these reasons, financial matters can rapidly grow out of hand. The rent or mortgage, of course, represents an essential payment that have to be made, but there are countless other outgoings faced by everyone. Where would the money come from to meet this expenditure?

Some people – who have probably not actually been in such a situation – put their faith in the assistance that is available as a matter of law through benefits such as statutory sick pay or redundancy payments. It is true that anyone employed under a contract of service, and earning a minimum of £90 a week will qualify for statutory sick pay of they are unable to work as a result of an accident or sickness. The problem is, however, that the current rate of payment is a meagre £75.40 (scheduled for review on the 5th of April each year) and is payable for a maximum period of just 28 weeks.

When it comes to the statutory requirement for redundancy pay, this again covers only those employed under a contract of employment (so the self-employed are once again ruled out). Moreover, eligibility is only earned after a minimum of two year’s employment with the same employer. The one-off redundancy payment is then calculated on the basis of the former employee’s age and length of service with that employer. Even the maximum rate, however, for those aged 41 or over is limited to just one and a half week’s pay for each year of service.

All in all, therefore, the statutory provisions provide small comfort and a pale reflection of the cover that can be provided by a personal income insurance plan. As the managing director, Simon Burgess, of one of the leading providers of such income insurance, British Insurance, says: “standalone income insurance can provide up to 50% of the policy holder’s normally earned income or a generous £1,500 a month, whichever is less. This is what makes income insurance such a reliable lifeline in the event of an accident, sickness or unemployment”.

http://www.britishinsurance.com/income-payment-protection-insurance/policy-summary.html
http://www.dwp.gov.uk/lifeevent/benefits/statutory_sick_pay.asp#howmuch
http://www.berr.gov.uk/whatwedo/employment/employment-legislation/employment-guidance/page15686.html

Being employed is great, you have the independence you need and you can use your income to pay your bills, purchase things you need and go to the places you want to. Have you thought about what will happen if you were to lose part or all of your salaried income? How will you pay your bills and keep food on the table? If you have mortgage payments to meet for example then having income insurance can be one of the ways to safe guard your lifestyle.

With the policy, you will be paid a monthly income for 12 or 24 months depending on the specific terms of your provider. The events covered are unforeseen involuntary redundancy, sickness or accident. If you return to work within the maximum payment period, the benefits will cease.

It should be noted that this income insurance policy is not the same as the long term ‘income protection insurance’ which can pay out for many years but does not cover unemployment.

Main Benefits of The Policy

There is no denying that income insurance can provide much needed peace of mind you need at a time when life could be very uncertain. You will have the much needed financial support if your regular salary was to suddenly disappear. Protecting your income could be the only thing that prevents financial ruin.

In addition to the emotional security you receive, the policy has very attractive financial benefits as well and best of all the premiums don’t have to be very high. If you shop at an independent protection provider such as British Insurance as opposed to one of the high street providers then you could save up to 80% on named protection products so be sure to check out what a stand alone policy can provide.

With this protection policy you may be able to claim more than once on the policy, but this is something you’ll need to confirm with your provider. In addition you may be able to choose any of the combinations of qualifying events, and this could reduce the cost of your premiums.

Before you can own and make a claim on your policy, the provider will normally require a minimum employment period (usually six months) before you can apply for a policy and there is a deferment period of 30 – 90 before you can make a claim.

You should know however that the policy will not cover your entire salaried income; because of the maximum benefit levels the provider will pay a percentage of your gross salary.

Conclusion
In such an uncertain economic climate, protecting your income with income insurance could be very vital. You will be able to claim a monthly income to keep you in the lifestyle you’ve grown used to even if you are unemployed or off sick.
This will take the financial pressure off you while recover or seek other employment.