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Long Term Income Protection
Long-term income protection, otherwise known as long term sickness insurance, is designed to replace your gross monthly income right up until retirement age should you be unable to work due to illness or injury.
ActiveQuote offers long-term income protection quotes from all the leading UK insurers. By using our unique comparison system you can compare long-term income protection plans online and buy your chosen policy instantly.
How does long-term income protection work?
If you are unable to work because of illness or accidental injury, long term income protection insurance will pay you a regular tax free benefit up to a maximum percentage of your earnings, often 65 per cent.
Long.- term income protection cover is normally structured to kick in after your employer stops sick pay, and will continue to pay out until you can get back to work or until the end of the policy term, whichever is sooner. Long-term income protection used to be known as permanent health insurance.
Why would I need long-term income protection?
Whilst you are not legally obligated to have long-term income protection insurance, it is actually one of the most useful types of insurance on the market. Half the UK population would survive financially for just 17 days should they suffer unexpected loss of income. Ask yourself the following questions:
- Would state benefits allow me to maintain my current lifestyle?
- Could I live off my partner’s income indefinitely?
- Do I have savings I could live off indefinitely?
If the answer is no to any of the above, then you should probably consider comparing long-term income protection quotes.
Many people believe that the state will provide them with enough money each month to live comfortably if they lose their job through illness or disability. But the government will only pay up to £101.15 a week in employment and support allowance (ESA) to eligible claimants. This may not be enough for you to maintain your current lifestyle, which is why long-term income protection can bring additional peace of mind.
What can long-term income protection be used for?
Long-term income protection insurance can cover all types of illness and accidental injury, including stress, depression and musculoskeletal problems. In fact, more than 10 million working days are lost each year because of musculoskeletal problems, costing society £7bn.
People take out long-term income protection cover for a number of different reasons, including:
- To protect the cost of mortgage or rent payments
- To protect their loan, credit card or car finance payments
- To meet their monthly commitments, like utility bills, mobile phone bills or internet
- To protect their general lifestyle like holidays, school fees or gym membership
There may be medical exclusions on your long term income protection policy, which means that some conditions will not be covered. We'll let you know what these would be after we've spoken to you and gathered information about your medical history.
How long will I receive benefits from my Income Protection policy?
With long-term income protection you can choose your benefit term. This is the length of time that your policy will pay out for if you become ill and cannot work. Most long-term income protection insurance quotes will have a benefit term that lasts until retirement age. For example, if you protected your income until the age of 65 and became ill at 40, your policy would pay out until you either returned to work or you reached retirement age at 65.
Someone who has been off sick for 6 months or longer has an 80% chance of being off work for 5 years, so a long benefit term could be a sensible investment.
When can I start to claim on my long-term income protection policy?
You can start to claim on your long-term income protection cover after your chosen deferred period. Your deferred period is the length of time after making a claim that the policy will begin to pay out. You can choose a deferred period of 4, 13, 26, or 52 weeks, depending on how long you could survive on your savings or how long your employer will give you sick pay. The longer the deferred period, the lower the cost of the policy will be.
How much will long-term income protection cost?
Monthly premiums for long-term income protection will depend on a variety of factors, including age, occupation and payment period.
- The younger you are, the less expensive your long term monthly premiums will be because you are less likely to fall ill.
- Your occupation will also affect your premiums. Long term income protection insurance premiums will be less for an office worker than they would be for a builder, because an office worker has a lower risk of accidental injury.
- If you select a longer deferred period then the premiums will be cheaper. A policy with a 13-week waiting period will typically charge lower premiums than one with a four-week wait because the insurance company's costs will be lower.
- Payment period will also affect the cost of the long term income protection policy. A policy that pays out until retirement will cost more than a policy that pays out for five years.
ActiveQuote will allow you to tailor all of these factors online to find a long-term income protection quote that suits your needs and your budget.
Traditionally women have had to pay more for long-term income protection insurance, because historically there is a higher experience of claims for female customers. However, from 21 December 2012 this will no longer hold true, and gender will not have a bearing on price.
Will my income protection premiums increase?
Unless you choose a reviewable or index linked income protection contract, the insurer cannot increase the premiums during the course of the contract.
What will my income protection policy define as incapacity?
With long-term income protection, incapacity will be defined on one of the following four bases:
- Own occupation – the policyholder is incapacitated if they are unable, following illness or accident to perform their own occupation and are not working in another job.
- Suited occupation – the policyholder is incapacitated if they are unable, following illness or accident to perform an occupation suitable to them given their education and training.
- Any occupation – the policyholder is incapacitated if they are unable, following illness or accident to perform any occupation at all.
- Activities of daily living (ADLs) – the policyholder is incapacitated if they are unable, following illness or accident to perform a number of defined functions such as dressing and undressing, washing, eating, climbing stairs, shopping, cooking etc. The policy will define the number of functions and their definitions.
What should I look out for when buying long-term income protection?
There are many things to watch out for when looking for a long-term income protection insurance policy. Here are just a few of them:
Don’t economise on cover
If you are looking to invest in a long term income protection insurance policy rather than a short term policy linked to a specific debt, make sure you take into account all of your essential monthly outgoings such as your mortgage, bills, council tax and food. Cheap income protection cover may seem a bargain in the short-term, but you could lose out financially if you need to claim in the future
Check with your employer
Before buying a long term income protection policy, check with your employer about other benefits you may be eligible for. An employer is only required to pay employees statutory sick pay for up to 28 weeks.
There are a number of restrictions you should look out for when buying long-term income protection. One of our expert advisors can explain these in more detail.
- Most long-term income protection policies will not pay out if you become unemployed for a reason other than illness or accident.
- Exclusions may mean that no benefits are payable for accidents of illnesses arising from drug or alcohol abuse, criminal acts, intentional self-harm or pregnancy.
- You should notify your insurer on change of occupation to avoid invalidating your long term income protection policy.
Compare Income Protection quotes online with us now.