Income protection insurance

Income protection insurance covers your outgoings if you’re unable to work due to an accident or illness or if you’re made redundant. It takes away the worry of being unable to pay the bills at a time when you need to focus on your health or on finding a new job.

What is income protection insurance?

Income protection insurance (IPI) protects against loss of income by providing you with a tax-free salary for a specified length of time if you can’t work. This could be because of sickness or following an accident, whilst you can also take out income protection in case of redundancy.

You can compare income protection insurance to make sure you have the right cover for your lifestyle and your circumstances. For example, you can choose between short term income protection, which typically provides cover for between six and 12 months, and long term IPI, which covers you in the event of you being unlikely to work again.

How does income protection work?

Income protection can be a lifeline if you choose your cover wisely and ensure it reflects your own individual needs. As with other forms of insurance, such as car and home insurance, the cost of policies differs depending on a number of factors, such as your job, the length of time you’ve been in continuous employment, whether you work full time or part time, your residential status and whether or not you smoke (including e-cigarettes). In general, the lower the cover, the lower the monthly premiums.

When comparing income protection policies, you’ll be asked to choose between accident and sickness protection only, unemployment protection only or comprehensive income protection, which covers both. Note that, in the event of a successful claim, there might be a deferred or ‘wait’ period before the initial payment is made. This can be from one month to up to a year, so it’s essential to check your policy details to know how long you would have to meet the bills for before the cover kicks in.

What type of premium do I need?

There are generally three options when it comes to your IPI premium; guaranteed, reviewable and age-related policies.

A guaranteed premium will not change unless you make changes to the policy, affording you peace of mind about the monthly payment and often proving the cheapest option in the long run.

The price of a reviewable premium can appear attractive initially but it can be reviewed after a set period and is likely to increase in the long term. Again, age-related premiums seem cheap to start with but rise each year, so make sure you know at the outset what future charges will be.

The cost of your policy will also be affected by the occupation class included in your cover, so again make sure you opt for the right class for your needs. The three main classes are own occupation, suited occupation and any occupation.

Choosing an own occupation policy covers you in the event you can’t perform your own specific job. It can be the right choice if, for example, your job depends on you being physically active and an accident leaves you unable to walk, but it’s likely to have the highest premium.

Suited occupation cover policy pays out if sickness or an accident means you can no longer perform a job that matches your skills and experience, whilst any occupation IPI insures against being unable to work at all and is often the cheapest.

What are the benefits of income protection insurance?

Without Income Protection insurance, there are other ways to pay the bills such as accessing an occupational sick pay scheme or Statutory Sick Pay (SSP), applying for disability benefits or using your savings. However, not all employers offer a sick pay scheme, whilst even maximum benefits often do not match a claimant’s full salary.

The benefits of having income protection include:

• Mortgage payment protection
• Loan payment protection
• The ability to pay utility bills, council tax and food bills if you can’t work
• Peace of mind that you can look after dependents
• The ability to maintain your standard of living
• Up to 70% of your gross monthly salary paid straight into your bank account
• Not having to dip into savings
• Cover for the value of employment benefits (known as P11D benefits), such as a company car and health insurance
• An income whilst you look for a new job following involuntary redundancy

How do I know what cover I need?

Income protection insurance replaces part of your income if you become unable to work because you’re ill or injured. You can choose from three main levels of cover, which pay out based on your situation:

Own occupation: you can’t do your own occupation. It can be the right choice if, for example, your job depends on you being physically active and an accident leaves you unable to walk, but it’s likely to have the highest premium.

Suited occupation: you can’t do your own job or a similar one that suits your qualifications and experience.

Any occupation: you’re too ill to do any kind of work.

How do I buy income protection?

The best way to make sure you’re getting the right policy for you is to compare income protection insurance from a number of providers. We are one of the UK’s leading comparison sites and we also partner with Gocompare, Uswitch and MoneySavingExpert to bring our customers the best cover at the right price.

When you compare Income Protection insurance with ActiveQuote you will be asked a short series of questions, starting with whether you would like to protect your income, mortgage, loan or credit repayments or other outgoings. You will also be asked if you want the policy to run for a fixed number of years or until you retire, and what your expected retirement age will be.

You will also need to list your gross income and any employer benefits and choose the amount you would like the policy to pay each month in the event of a successful claim, as well as filling in details including your name, date of birth, postcode and whether you smoke.

Why compare income protection insurance with ActiveQuote?

In addition to providing quote comparisons online, we offer free, impartial specialist advice over the phone when needed. We are an independent and unbiased insurance broker and work with a panel of leading insurers including:

• Aegon
• AIG
• Aviva
• British Friendly
• Cirencester
• Exeter
• Holloway
• L&G
• LV=
• Royal London
• Shepherds
• Vitality
• Zurich