Income protection provides the policy holder with a replacement income if you were to lose your own after becoming a victim of redundancy or incapacity. The actual name for this type of policy is income payment protection and it is often confused with a policy similar named which would pay out for as long as your retirement age if needed but would not cover redundancy, just incapacity.
The policy we are discussing here is often called income protection so this can be a little confusing. However this type of policy would cover both redundancy and incapacity but it would pay out over a shorter term. Usually the provider will sell cover that would continue supplying your income for either 12 months or 24 after which time it would cease if of course you were to have to rely on it for this long. You would need to stand to the first 30 to 90 days of suffering one of the events you covered and some providers date back the benefit to day one. The amount of benefit that you would get back from the policy is the amount that you decide to protect and which your provider agreed to at the time of you applying for the cover. Generally you would be able to protect up to £1,500 or half of the gross monthly income whichever was the least amount. This is then your tax free income.
You should however bear in mind that any policy will come with some exclusions in it and that these would have to be checked against your lifestyle before taking on a policy as they could stop you from being eligible to make a claim on your policy.
When looking at taking out income protection you can get cheaper premiums with a standalone provider. You could find you can make up to as much as 40% savings on a policy when compared to the standalone provider. One of the factors taken into account when deciding how much you would pay for your policy is the events chosen to insure against. While you can take a policy that would pay out if you suffered from either event you could also tailor the cover. If you were entitled to sick pay then you could just take cover against unemployment on its own. If you wanted a policy to provide an income in the event you became ill or had an accident and could not work then you could just protect incapacity. Your provider might also be generous enough to provide you with carer cover in your policy. Should carer cover be included then you would also be able to make a claim if one of your close family members were to become incapacitated and you remained at home to take care of them.
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