Income protection can be taken to ensure that if you became unable to work after falling ill or suffering an accident or if you are made redundant you would have income coming into the home. This income would come at a time when you needed it the most, while you searched for work or concentrated on recovering.
The amount of income that you got back from your policy would be the sum chosen to cover. This amount would have to be agreed by the provider and you could claim it as your tax free income if you suffer from one of the events you decided to protect against such as involuntary redundancy or incapapcity. You would not be able to make your claim on the first day of your unemployment or incapacity, the provider will state how many days you have to wait before claiming. With some this could be from the 30th day and with others you could have a wait of 90 days. You could benefit from your income for up to 12 months with some providers and with others your benefit could be paid over a period of 24 months. You premiums would cost more if you had an income to rely on over 24 months.
The type of income insurance outlined above is actually called income payment protection and should not be confused with a policy actually named income protection although the same term if often used for income payment protection. The other form of cover pays under different circumstances. It would not pay out for redundancy, just incapacity and it would pay if needed up to your retirement age if you needed to claim that long. The length of potential benefits payout is reflected in the premiums and a medical exam may also be needed before you are accepted for cover.
You could choose to cover your income for redundancy and incapacity and claim for either event. You might choose just to take protection for unemployment alone if it suited your lifestyle more, for example if you had a generous employer who paid out generous sick pay. You could alternatively choose just to insure against incapacity should you feel secure doing so. The events you did choose to protect would be taken into account towards deciding how much you would have to pay for the monthly premiums. When considering what you could claim against you need to find out if your provider would pay out for carer cover. Some generous providers will include this and it means that should you have to give up work to remain at home to take care of a family member you will still have your income to rely on.
Finally always check the terms of any income protection you consider. There are always at least the most common exclusions in any policy but some providers include many more. For example you would need to be in work full time and have been working for a certain amount of time before applying for your policy. This could be in the region of at least 6 months. You would also have to live in the UK, Channel Isles of the Isle of Man in order to be eligible to take out a policy.
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