IP

INCOME PROTECTION INSURANCE

Income protection helps maintain your standard of living by providing a monthly income should illness or injury prevent you from working.

You arrange an Income protection policy to fit your individual needs. You choose the level of benefit you want to receive each month based on your current earnings, how soon you'd like the payments to start in the event you are incapacitated, and the length of the policy term at outset.

For example, Sam is 35 years old, and his gross salary (before any deductions) is £30,000 a year. His employer will pay him full salary for 3 months if he is off work, then no salary after that. He wants to insure for the maximum benefit allowed until his 60th birthday.

(Companies offering this policy have different maximum limits which can be 50%, 55% or 60% of gross salary).

Let's assume the best quotation for Sam allows 55% of gross salary. His Income Protection policy detail would £16,500 per annum, DEFERRED for 13 weeks and stopping on his 60th birthday. £16,500 is 55% of his £30,000 salary - Sam would start to receive benefit after being off work for 13 weeks). This would be in addition to any State Benefits he is eligible to receive.

Deferred is insurance jargon for waiting time. The Insurance Company needs to know how long you want to wait before paying any benefit. If you have time off due to illness or accident, your employer might pay your full salary for a time which could be 4, 13 or even 26 weeks.

Proof of income is required by the Insurance Company before any claim is paid. For Employed people - salary slips and/or P60. For Self-Employed people - proof of income (i.e. Accounts).

	What might I get back at the end of the policy? This type of policy has no savings or investment element therefore no money is payable at the end of the policy term and there is never a surrender value.
	What happens if I stop paying the premiums? Your policy and insurance benefits will stop completely.
	What happens if I die? Income Protection Policies do not ordinarily have a death benefit.
	What about my tax situation? Under current UK tax laws, money received from an income protection policy is free of income tax. This applies to Basic and Higher Rate Taxpayers. The tax regime has changed in the past therefore it is always possible it could alter in the future.

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IMPORTANT NOTE
INSURANCE COMPANIES DO NOT OFFER IDENTICAL INCOME PROTECTION POLICIES -
HERE IS A LIST OF ADDITIONAL BENEFITS SOME OF THEM INCLUDE WITHIN THEIR POLICY

Guaranteed benefits - most companies will never cancel your policy because of the length or number of ELIGIBLE claims you make. Monthly payments are normally guaranteed until you return to work or the policy terminates.

Compensation for reduced earnings - if earnings are reduced because you are unable to return to your previous work or your previous salary some policies will compensate you.

Nearly all companies state that there are no premiums to pay once a person is in receipt of benefit.

Hospital Benefit - after a policyholder has spent 7 consecutive nights in hospital some companies will pay £150 for each extra night, provided it is in the deferred period, for a maximum of 90 nights.

Guaranteed Insurability Option - certain companies will an increase in benefits from the current level (within limits) without further medical underwriting in the event of a house move, home improvement, getting married, becoming a parent or receiving a significant salary increase.

Accidental death benefit - some companies provide a lump sum benefit of £50,000 in the event of death resulting from an accident.

Benefit for housepersons, part-time workers and the unemployed and career break options.