Income Protection is still a relatively rare product in many people’s financial portfolio, even though it covers far and away your biggest asset, your income. Maybe the reason is because it is a discretionary purchase. Unlike car insurance for example, you are not required to have it by law. So it has to compete with all of the other financial expenses in your life… and can be mistakenly considered less important.
Paying for income protection is certainly not the most enjoyable use of your money, but without your income, everything is at risk; holidays, your lifestyle, your mortgage repayments, the lot. It's your income that keeps all of these going for you.
So what is it? Income protection provides a replacement income should you become unable to work due to illness or accident. There are a few features that are well worth considering.
The premiums paid for income protection policies qualify for tax relief at your marginal rate of tax. Unlike health insurance and other tax breaks that only get relief at the lower 20% rate, income protection (like pensions) attracts relief at your highest rate. This can reduce the actual cost by over 40%.
You can align it with other entitlements
You may already have some sick pay benefits from your employment that kick in immediately when you are unable to work, and usually lasts for a set number of weeks. The payment of income protection benefit begins after a deferred period (waiting period), usually anything from 13 weeks to a year from the date you are first out of work. The longer the waiting period, the cheaper the cover is. So it makes sense to take account of any sick pay that you might get in the short-term.
It’s all about paying claims
Once benefit payments begins, they continue until you are able to return to work or until the expiry date of your policy, which often may be up to age 60 or 65. Indeed if you are able to return to work part-time, the insurance provider may help you with this and will often agree to continuing to pay you a lower level of benefit, to help you transition back to work.
We look at cost too
Apart from your benefit levels and duration of cover other important cost factors include your age, state of health and your occupation. We can arrange either a guaranteed payments amount or a reviewable payment amount that might increase over the years. While guaranteed premiums will look a bit more expensive at the outset, you get certainty that they will never change. It’s a bit like taking a fixed rate mortgage rather than a variable rate.
Your income funds your lifestyle and pays the bills. This needs to be protected. Once you make that decision, we’ll help you put your income protection cover in place.
We all of course hope that we will be very old when a claim happens on our life assurance policies. As a result, too many people are slow in getting enough discretionary life cover in place – that is life cover that is not tied to your mortgage or other such loans. Instead this is financial protection to cover the future lifestyle of your family. Delaying is a big mistake – there are quite a number of reasons to get your life cover in place at the earliest possible opportunity.
Get cover while you are healthy
The number one reason not to delay. Don’t wait until you get sick and are suddenly considering your own mortality before you go looking for life cover. The ship may have sailed at that point in terms of getting cover without premium loadings or cover exclusions, or indeed being able to get cover at all. Your age and state of health are the biggest drivers of the premium rates that will apply to your cover.
Your family get older at the same rate as you
Another significant factors that life assurers consider is the family history of the likes of heart disease, diabetes, cancer and a wide range of conditions. As you age, so do your family at the same rate, and their likelihood of suffering such diseases increases. Get your life cover in place early while your family are hopefully healthy too.
You’re less likely to have “found something”
As we all age, we tend to get a bit more aware of our health risks and get more regular health check ups. You might start getting your blood pressure or cholesterol checked or indeed a range of diagnostic checks. These are really important as they may reveal potential health risks for you that can then be managed. These checks are always worth getting done but a downside of them is when you are looking for life cover. If the tests have revealed something, this must always be disclosed to the life assurer or you risk invalidating your life assurance. The results of these tests may end up resulting in your life cover being more expensive. Again, get your cover in place while you are healthy and have no negative health symptoms or test results, in order to secure the lowest premium rates.
The cost of cover increases with age
Life cover rates change according to age, with younger people attracting the lowest rates. You can choose for these rates to be locked in for life. Yes you will be paying for cover from a younger age, but as you age these premium rates will appear incredibly cheap in comparison to those applying to older people.
We hope we have given you some food for thought as to why it might be a good idea to get cover in place now. The next step is to find the most appropriate policy for you – and that’s where we can help. We look forward to helping you get the right type and amount of cover, at the right price to suit your specific needs.
Our offers have been extended to the end of May, with up to 17.5% off monthly premiums for Life Cover, up to 15% off Mortgage Protection Plans and 12.5% off Pension Term Policies.
The main change to the discounts is that due to the continued rise in Specified Serious Illness Claims being paid, you can now only avail of up to 5% off Serious Illness Cover.
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