Income Protection 101

A quick summary:

We've partnered with independent online broker Anorak for an introduction to income protection.

What is 'income protection'?

Income protection is an insurance policy that pays out monthly if you lose your income for medical reasons. It covers you for any medical reason (physical or mental, illness or injury), so long as you've been signed off work by a health professional. The idea is to cover part of your income, making sure you'll always have money coming in, even if you're too unwell to work.

No-one knows what the future will bring, but having this kind of cover in place gives you peace of mind that you'll always be able to manage financially – regardless of any health problems that come your way.

Most working adults need income protection because, in reality, most of us have financial commitments and would be financially affected if we lost our income. If you have a partner, children, or other dependents, the need to protect your income could be greater still – because any loss of earnings could impact your ability to support not only yourself, but those you love too. Income protection can be particularly valuable for

Couples

Parents

Single Parents

Homeowners

Renters

Whatever your situation, it can be helpful to think about it in terms of what your alternative would be if you lost your income. What backup do you have? Without income protection, you might be able to manage for a short while if you're off work for medical reasons, by temporarily changing your lifestyle, borrowing money, or relying on others. But over the long term, for many people, the financial impact of losing your income could quickly spiral into significant consequences – from permanent lifestyle changes to lost savings.

Many of us have a tendency to think we’re invincible and to bury our heads in the sand when it comes to the likelihood of us getting ill. But the chances of being too ill to work for a while are often higher than we think – because of illnesses or accidents that could happen to anyone.

Full-term cover

Pays out for as long as you need – until you go back to work, retire, or your policy ends. For complete peace of mind that you’d always have money coming in.

Short-term cover

Pays out for a maximum payment period (usually 1, 2 or 5 years). Cheaper than full-term cover, but bear in mind it stops paying after that time – even if you still can’t work.

The ‘waiting’ period

How long you wait before your policy starts paying out. The longer your waiting period, the cheaper your premiums (but you’d need to be able to tide yourself over in that time).

What do people claim for?

Income protection covers you for any medical reason if you’re signed off work by a healthcare professional. Common conditions claimed for include:

Musculoskeletal injuries or conditions

Like broken bones or back pain

Mental health conditions

Like stress, anxiety or depression

Other serious illnesses


Got it – but how much cover do I need?

Anorak works it out for you. Based on your profile Anorak work’s out how much cover you need, for how long – and how much it'll cost.  Anorak works with you to make sure you choose a sufficient level of cover – without paying more in premiums than you need to.

Key Takeaways 

  • Income protection insurance pays out a monthly benefit if you’re unable to work for any medical reason
  • Income protection doesn't pay out for any other kind of income loss, like redundancy
  • Anyone who’d be affected by losing their income could benefit from having income protection in place
  • Income protection makes sure you can cope financially if you're off work for medical reasons without having to change your lifestyle, use up savings, or take on debt
  • In particular, income protection can be important for those with dependents, and for self-employed people who don't have benefits like sick pay through work

Want to explore income protection options for you? Anorak is a simple, convenient way to get expert advice and buy cover online. Now available on Heka.