Insurance is a way of protecting your assets. Since your income is one of your greatest assets, shouldn’t you think about insuring it too?
What is income protection insurance?
Income protection insurance is a policy that makes sure you get a regular income until you are well enough to return to work. It allows you to concentrate on your recovery, giving you the financial resilience to cover all your outgoings and providing lasting peace of mind.
Do I need income protection?
Most of us take a few sick days now and then without losing any pay, but if we have to stop working for weeks or even months, it can be a very different story. If your salary is your main or only source of income, you might be disappointed by how little financial help is available. Some employers give generous packages but many will offer only the bare minimum the law requires. For the self-employed there’s even less.
A few things to consider if you’re thinking about income protection
How many sources of income you have
If you depend on your salary and have no other way of earning money, income protection could be the best way to avoid financial difficulties.
What kind of sick pay your employer offers
By law, your employer is obliged to pay you just £116.75 a week. Some will go much further but many will not. Check what your employer will pay you if you have to take sick leave and for how long. If your sick leave lasts 4 weeks for example, you may want to set your policy to kick in after the 4 weeks.
What options you have if you’re self employed
Self-employment has many advantages but you have no employer to help when you can’t earn. The government offers Employment and Support Allowance, but it’s only £90.50 a week. Unless you’ve built up savings specifically for an emergency, income protection could be the solution.
If you have dependants
If your income supports not just you but your partner, children or a loved one, losing it could have a serious impact. Income protection can ensure everyone is well looked after.
If you’re happy spending your savings on household bills and expenses
If you’ve been able to build up your savings, maybe for a deposit or a major purchase, you may want to consider whether you would be happy using it to pay your bills.
Choosing your level of cover
If you decide that income protection is something you need then your next decision will be to work out your level of cover. This is the amount your insurance policy will pay out if you make a claim and it’s approved.
When deciding the level of cover you need, you may want to think about the following:
- How much would I need per month to cover my bills and expenses?
- How much would I like to pay per month for Income protection insurance?
- How long would I like my cover to last?
- How soon after I stop getting sick pay would I like my insurance to start?
Who doesn’t need income protection?
Not everyone will need income protection. But at Eleos we believe everyone should know it exists and how it works.
Income protection insurance may not be a priority for you if:
- You have more than one source of income
- Your employer gives you generous sick pay
- You’ve set aside emergency savings that you’re happy to spend
Of course, if you already have one or more of these, you can still get income protection as it gives you extra assurance knowing that incase of illness or injury, you will be covered.
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