According to some fairly recent research*, only a small proportion of the working population has any form of income protection. Despite income from work being the only financial means of support available to the overwhelming majority of people, only one in ten has income protection. Of the nine-tenths who have none, a surprising two-thirds either have no clue how they might cope if they were unable to work – and their income was abruptly withdrawn – or have quite unrealistic expectations about where any financial support might come from.

The research revealed, for example, that many individuals put their faith in being able to fall back on their savings. In reality, however, the average level of savings, when compared against the average level of expenditure, would last less than two months at most. Indeed, personal savings are at such a low level that more than a third of the country’s work force has less than £500-worth of savings to fall back upon. Again, when compared with average levels of expenditure, such a relatively small amount would last a mere 11 days. All in all, therefore, the notion of savings as an adequate source of income protection seems quite unrealistic.

It is surprising, too, how relatively few employees are aware whether or not their employer will continue to pay their salary if they are unable to work because of sickness – and many of those who do know, remain unaware of what proportion of normal pay will continue to be paid or for how long. Nevertheless, it is estimated that broadly a half of the work force has no sickness benefit protection at all from their employers.

Of the current work force of 25 million or so, approximately one in eight are self-employed (and with redundancies currently so rampant, this figure is likely to be growing fast). The self-employed obviously have no access to employer-provided benefits if they are unable to work because of an accident or illness, yet only an estimated one in ten has any form of income protection.

It is surprising to discover such misplaced faith in the imagined sources of support in the event of an accident, illness or unemployment depriving an individual of their normal working wage. It is the more surprising when effective and affordable income protection is so readily available by way of a simple and straight forward insurance, income protection insurance.

Income protection backed by this form of insurance will provide a regular, replacement monthly income in the event of the policy holder’s incapacity to work (because of an accident or illness) or their involuntary unemployment. In the event of a claim, the insured benefits are paid out, free of tax, every month until the policy holder is able to resume normal working, has secured alternative employment, or for up to a typical maximum of 12 months, whichever is the soonest.

* Yorkshire Building Society – The Protection Gap, July 2008

Income protection insurance cover is your safety net against losing your income. You might suffer from a loss of income if you were to become a victim of redundancy or you could suffer incapacity. Either of these situations could make your life a great deal harder than it could be if you had given some thought to taking out a policy. Cover does not have to work out expensive if you choose to take it with an independent provider and compare the cost. You can also compare what you are paying out for and ensure cover is suitable.

One of the factors taken into consideration when deciding how much the premiums would be is the amount of your monthly income that you choose to protect. This amount is the tax free sum you get back from your policy should the need arise to make a claim so it would need to be agreed by the provider. You would have to wait for a period of time before being eligible to make a claim on the insurance and this would be provider dependent and be in the region of 30 to 90 days. Some providers might offer income protection insurance cover that would continue for 12 months and other providers might extend payments to 24 months therefore you would have to find this out before taking on your policy. Cover that pays out for 24 months would of course work out more expensive than protection paying 12 monthly payments in income. A period of 12 months could also be more than adequate for you to have made a full recovery and be able to get back to work or would provide time for you to have found work.

With income cover behind you there would be less chance of you failing to maintain your essential outgoings. These of course would be dependent on your circumstances but would usually include rent or mortgage repayments. While income cover isn’t specifically for your mortgage repayments as there is mortgage payment cover to consider, it could allow you money towards keeping your repayments up to date. If you are renting then landlords will expect their rent on a monthly basis and if you were to fall into arrears you could be evicted. All households would also have utility bills to meet and falling into debt with these could see you losing your services.

Of course income protection insurance cover would cover any essential outgoings and commitments. You would be able to spread out the income as you wanted between any outgoings. Without this income you could have to make drastic lifestyle changes and even then you could still fail to be able to meet all your outgoings. With cover you would have the time needed to concentrate on looking for work or making a recovery without the added anxiety of where you would get the money needed for those all important outgoings.

Income protection insurance cover could make a great deal of difference as to how you managed during your incapacity or unemployment. The income supplied by your policy would be the amount that you chose to insure, up to a limit, and would be supplied between the 30th and the 90th days of losing your income to one of the events you chose to protect against. Tax free payments would continue for between 12 months and 24 so you would need to check the terms offered by your chosen provider before taking out the protection.

Another factor that goes towards determining how much you pay for your premiums each month is the level of cover you choose. Standard income protection insurance cover would protect against unemployment and incapacity together. However you might not need to take protection against both events if for example your employer provided a good sick pay plan. If this were the case then you might just want to protect against the possibility of losing your income to redundancy. However if you do not get sick pay then you could just take protection against the chance of incapacity caused by accident or sickness.

The income your policy provided could be used however you wanted and when you wanted, to pay whatever bills you wanted. You might choose to use some of it to maintain your utility bills to ensure that the home was warm and kept out of the dark. You would also have the money to go shopping to keep food on the table for your family. Of course there could also be many other outgoings which have to be serviced during the time you are searching for work or recovering and you could use your policies benefits to fall back onto.

If you were relying on claiming an income for the State while you were unemployed or incapacitated then you might be let down. First you would have to ensure that you would be eligible to claim an income and there are many factors that could stop you. For instance if you have someone living with you in full time employment then you might not be eligible, the same could apply if you had savings over a certain amount. Even if you could apply successfully for State benefits the income you might be entitled to receive might fall short of the income you brought home when you were working. This again could mean that you are left struggling to maintain your essential outgoings from month to month.

If you should rely on using savings to get you through your unemployment or incapacity then again you could fall short. You would not know how long you would have to turn to your savings to keep maintaining your essential outgoings as it could take many months before you were able to find work or make a recovery and get back to your own job. By this time your savings could have run dry and you would be left with problems. A monthly premium for income protection insurance cover could stop these worries.

Income protection insurance cover could ease your life if you were to become a victim of redundancy, accident or sickness. At anytime and with little warning you could be made redundant or suffer from illness or an accident and it could take several months before a recovery is made or you found work. With something to fall back onto you would at least have some income to replace your lost one for the term of the cover and this would provide enormous peace of mind.

If you choose to search around for the protection with an independent payment protection specialist you would be able to compare the premiums for income protection insurance cover. One of the factors taken into account when deciding how much you pay for the premiums is the amount you choose to protect. This amount would be pre-agreed with by the provider when applying and is the amount of money you get back from the policy if you should need to claim on the insurance. The income is paid to you tax-free once the deferment period has passed which could be between 30 and 90 days. The protection would continue to provide your income for between the 12th and the 24th month depending on the provider. This could be more than enough time for you to have searched around and secured work or it would give the security needed to concentrate on making a full recovery.

With income protection behind you, at least for the term of the cover you would know how much money you have coming in. This money would be used towards meeting all of the essential outgoings that come into the home on a monthly basis. These could include such as gas and electric bills and your food bill which all helps to keep life comfortable during this stressful time. Without a policy behind you lifestyle changes might have to be made and these could make life extremely uncomfortable for the whole family. Even when making changes you could still find that you are unable to find the money for all your outgoings which could mean you have to fall back onto savings, if you have any. However as it could take many months to find work or to recover any savings you have could run dry well before recovery or you had managed to secure work.

If you were to rely on State benefits to provide an income you could also be let down and income protection insurance cover could be a far more viable option. You would have to be eligible to claim from the State and this would mean checking several factors. These would include such as not having savings in the bank over a certain amount. Even if you were to meet the criteria asked by the State very often any income you are entitled to receive is often far less than the income you brought home when working. This again could leave you with a struggle on your hands to find the much needed money for all essential outgoings and make life more stressful than it needs to be.

Income protection insurance cover is likely to have been a very wise move on the part of many working people during the months and years ahead. As if one credit crunch was not enough, a report in The Independent newspaper on the 27th of December 2008, predicted the possibility of a second during the course of 2009.

The continued difficulties faced by all of the UK’s banks are a function of the decline in the country’s economy as a whole. As the absence of credit tips both businesses and individuals into bankruptcy, so the banks suffer still further losses and the availability of credit from the banks becomes even more restricted. In this vicious cycle, therefore, more and more businesses are likely to fail during the coming year and with those failures, of course, will be the loss of hundreds of thousands of jobs.

Government statistics show that close to 2 million people are currently without jobs and most commentators predict that, with the further waves of expected redundancies, this figure will climb to 3 million before the end of 2010. Even the previously “secure” public sector will no longer remain immune to such job losses.

The spectre of redundancy, combined with the continuing “normal” perils of time away from work because of accidents and illness, therefore, makes income protection insurance cover an especially wise precaution. This is a variety of payment protection insurance that guarantees an alternative, replacement income even when the policy holder is incapacitated from working by an accident or sickness or is involuntarily unemployed. Subject to the absence from work or lack of a job exceeding a given minimum period (which can range from 30 to 90 days, depending on the particular policy chosen), the replacement income continues to be paid until the policy holder is fit enough to return to work, has found another job, or typically for up to 12 months (with some policies offering the option of extending the maximum permissible payout period to up to 24 months).

Policies also vary with respect to the maximum amount of cover that it is possible to arrange. Typical limits, however, are 50% of the policy holder’s normally earned income, or £1,500 a month, whichever is the lower figures. In any event, it is clear that income protection insurance cover can provide a desperately needed alterative source of income when the normally earned remuneration from work is no longer available.

Specialists in the provision of this type of insurance cover are British Insurance, whose managing director, Simon Burgess, considers: “income protection insurance cover is something that the current economic climate has made a practically indispensable safeguard for anyone currently enjoying a regular income from a steady job. All the indicators are that what has been a steady job in the past might certainly not be so in the future. Without the protection afforded by this type of insurance, most people would face extreme financial hardship”.

http://www.independent.co.uk/news/business/news/british-banks-may-face-second-credit-crunch-in-the-new-year-1212724.html

Income protection insurance cover gives you a replacement income if you should lose your own after suffering unemployment or should become incapacitated. Unemployment could be caused by redundancy and you could become incapacitated through accident and sickness. The income received back from the policy would be a portion of your own which the provider had pre-agreed with when you took out the cover.

If you were to get a quote for income protection insurance cover from independent provider British Insurance, you would be eligible to make a claim on the protection from day 30 of unemployment or from being incapacitated. They also date back your policy to the first day of you being made redundant or from you being unfit for work and then continue to provide you with an income for 12 months. After this time the cover would cease, but it can provide you with enough time to have searched around for another position or to have made a recovery from accident or illness.

The income you gained each month from your income protection insurance cover could be used towards servicing any essential outgoings that come into the home. You could for example use a portion of it to pay for the monthly food bill; you might also use some to cover the utility bills. Whatever bills came into the home you would be able to use it towards and this would make a great deal of difference to your lifestyle. If you did not have anything to use as a back up plan then you could have to make cutbacks which would have an affect on all family members. Even then you might struggle to manage to maintain all of the outgoings and still have to juggle bills around with the hope of catching up on them.

If you were to rely on being able to claim State benefits you could be let down. One of the criteria which would have to be met is that you do not have savings over a certain amount. However if you have been awarded redundancy money and it is over this amount, or you have any savings over a certain amount, the State would expect you to use these first. There would also be other criteria which would have to be met and even if you managed to be able to get State benefits, you might find they do not pay an income anywhere near your own.

Income protection insurance cover is another payment that has to be shelled out of your pocket and like any other insurance it is a bit of a gamble. However you could be taking a much bigger gamble by not having something to fall back onto if you were to become one of the statistics of accident, redundancy or sickness. These events can happen at anytime and with very little warning and a policy can really make a difference if it should happen to you. You could be glad you had paid out the small monthly premium charged by British Insurance for a policy.

Whether or not you need income protection insurance cover depends on your circumstances. Firstly, are you concerned about maintaining your monthly commitments if you were to lose some or all of your regular income.

Do you have cash saved up for such events if not do you have family or friends who can loan you some cash to keep you afloat? If you have no secondary source of income and you are concerned about protecting your income then you might want to invest in income protection insurance cover.

Main Benefits
The policy will pay you a regular monthly income if you are involuntarily unemployed through redundancy or if you are off work due to sickness or accident. Providers tend to be very specific about the qualifying events.

The benefit is paid free of tax for 12 or 24 months depending on the provider terms and unless your policy is linked directly to a loan or mortgage you can pretty much spend the cash as you like.

You can use the cash to keep you out of debt and to avoid missed payments on debts that are reflected on your credit profile. One of the disadvantages of a poor credit profile is the difficulty it causes when trying to obtain low interest credit.

You will have peace of mind. The policy benefit will pay out when you need it most.

Points To Consider
Income protection insurance cover is not medically underwritten so your full medical history is not called to question. As a result of this, there maybe certain things that are not mentioned when taking out the policy.

These policies carry exclusions relating to existing medical conditions, reasons for redundancy and number of weekly employed hours. If it is not checked carefully these exclusions could make it difficult to have a successful claim.

Before taking out your policy, be sure to read the terms and conditions carefully and match it to your circumstances.

Another point to note is that the premiums can vary depending on the provider you choose. With a high street lender the premiums will be much higher than with an independent provider.

One independent protection provider – British Insurance - is very aware of this and is intent on making a difference. Managing Director Simon Burgess says ‘At British Insurance we treat customers fairly. We don’t see the need to charge exorbitant premiums for the sake of it therefore we can offer up to 80% in premium savings on loan protection products’

Summary
An income protection insurance cover can be a very useful means of maintaining your lifestyle if all or part of your salaried income no longer existed. Once you do your homework surrounding the policy terms and conditions and your circumstances fits the policy, there is no reason why you can’t enjoy all the benefits the policy has to offer.

These are dark days for the economy. Each day, television broadcasts and newspapers carry what seems to be the latest slide into prolonged difficulties. A recent commentary in The Independent newspaper, on the 5th of December 2008, for example, said readers could “expect the 2008-10 recession … to be the worst since 1945”. For the individual, the hardships are unlikely to be resolved soon and every penny of income has to be watched carefully. It is even more important, therefore, that any risk to the income continuing to be brought home is adequately secured with income protection insurance cover.

Recession takes the economy in a vicious circle: falling consumer demand for goods and services means that companies both large and small experience declining sales. Falling sales result in those same businesses cutting back on production and making employees redundant. Unemployment rises and business profits slump, so consumer demand drops still further. There seems an awful inevitability in the spiral.

Not only is the spending power of the consumer’s income reduced, but his job is at risk, too, therefore. But that is not the only threat to a regular income. On top of the man-made perils of economic recession are the “natural” disasters of accidents and illness, both of which can lead to an incapacity for work that might last several months.

Income protection insurance cover provides security against both these economic and natural misfortunes by providing an alternative, replacement monthly income in the event of accident, sickness or unemployment. It will provide a predetermined alternative level of income every month throughout the period of incapacity or unemployment, until the policy holder returns to work, or typically for up to a maximum of 12 months (there are some policies that pay out for up to twice that time, although the monthly premiums are, naturally, rather more expensive).

Income payment protection insurance – as it is also known – is very flexible and can be used to cover any amount of income, typically up to a maximum of 50% of the policy holder’s normally earned income, or £1,000 a month, whichever is less (once again, the actual limits available under any one policy are likely to vary from insurer to insurer). Nevertheless, a replacement income at anything like this level can make all the difference between managing to hold your head above the troubled economic waters and going under amidst a sea of uncontrollable debts during the time that the income from normal working is interrupted.

There are a number of independent insurance providers in the market for income protection insurance cover and one of the specialist leaders is British Insurance. The company’s managing director, Simon Burgess, advises: “although the gloom of the present recession looks set to be around for some time yet, there are simple steps that can be taken to safeguard an income when accident, sickness or unemployment strikes. Income protection, therefore, can help prevent a gloomy situation from becoming even worse”.

You could consider income protection insurance cover to provide you with a replacement income if you suffered an accident, were to fall sick or become a victim of redundancy. You could insure so much of your monthly income against these events, which the payment protection provider would pre-agree with. If you then became a victim you would have to wait for the deferment period to pass and then make a claim on the policy. The replacement income you received back would be the sum you insured and it would be tax free.

The deferment period is the time you would have to be unemployed or incapacitated before making a claim and it differs with providers as does the length of time the policy would payout. If you take out your income protection insurance cover with one of the leading payment protection specialists British Insurance, you can claim on your policy after the 30th day has passed. British Insurance would then give you an income for as long as the 12 month which ensures you have time to attend interviews and find work or to make a recovery.

British Insurance also offers a policy that comes with just a few exclusions. Others however could add in more and they would need to be checked against your lifestyle. Some could also ask that you wait for as many as 90 days before you could claim. Providers might also payout for up to 24 months on their cover so check this also.

Income protection insurance cover can help greatly during your unemployment or incapacity. Without having the safety net of cover you could find yourself having to make a great deal of changes to the way you live. You could have to cut back on many things and find yourself suffering as the result of having to do so. Life could become a great deal harder than it could be if you had taken out cover. With the money from a policy you would not have the worry of where to find money to continue servicing your utility bills. Without money for these you could suffer a loss of heating and lighting. You would also not have to scrimp and scrape just to put food on the table for your family. You would be able to spread your replacement income about to meet any essential repayments that need to be made each month.

If you should rely on savings to pay all of your essential monthly payments you could find they run out well before you get back to work or have made a recovery. In some cases it could take you several months to manage this and by then your savings could have been depleted. If State benefits were your safety net then these too could also be a big disappointment. Firstly you would have to be eligible to claim money from the State and even if you were you could find that the benefits supplied does not come near the income you usually bring into the home. Income protection insurance cover would at least provide you with a good size income for the term of the policy so you know you would have something if needed.

If you are concerned about the state of the economy or perhaps you are worried about being unable to provide for yourself and your family, if you were unable to work, you might want to consider protecting your income with income protection insurance cover.

The main benefits of the cover are the peace of mind and the monthly income it provides if you were to lose your job due to an involuntary reason.

More About The Policy

The income protection insurance cover will pay you for a period of 12 – 24 months depending on the provider you choose.

The policy will pay out on three main types of involuntary unemployment and they are redundancy, sickness and accident.

Most lenders will have maximum benefit levels so your income will be a percentage of your gross salary. With this in mind you need to ensure the benefit level you choose is adequate.

Some providers will limit the number of claims to one per policy, so this is something you need to know before making a decision.

Policies are usually linked to debts such as loans and mortgages so these debts are often repaid first once the benefit payments start.

In order to make a claim, most providers have deferment periods of 30 – 90 days so you should be aware of this.

How To Choose A Provider

When choosing a provider you should look for companies that provide good value policies for the premiums they charge. The company should be known for it’s ethical practices as well.

The cost of premiums is therefore the main differentiator between providers. If you were to obtain a quote from a high street lender, you will see that the premiums are much higher than that of an independent provider.

For illustration purposes, British Insurance is an ethical provider of protection products and Managing Director Simon Burgess says ‘At British Insurance, we believe in providing value for money, this is why we can provide our customers with up to 80% savings on loan insurance and up to 40% on mortgage protection products’

In addition to good products at affordable premiums, your provider should take the time to explain the terms and conditions of the policy to you. There are often exclusions that go unnoticed and it is these exclusions that can prevent your claim from being successful.

You should read your terms and conditions carefully and question anything you don’t understand. Make sure you know everything you need to know before signing up.

Conclusion

Income protection insurance cover will help take care of your monthly financial commitments if you were to lose your salaried income. Job loss does not have to be stressful. If you have a replacement income it will make finding a new job or recovering from an illness so much easier.

If you are keen to protect your income and maintain your lifestyle during such a difficult time then you may want to consider obtaining an income protection insurance cover policy.