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Comparing income protection insurance

Do you sometimes wonder if you should plan for if you or your partner were unable to work for a while? There’s always the worry of redundancy, or worse, one of you could become unwell or injured in an accident which would mean that you couldn’t work.


It’s not a nice thing to think about, but it’s important, especially if you’re paying a mortgage, loan or other debts, or have children to support.


Even if you have some savings set aside, these could disappear quite quickly once they are being used to pay for your monthly outgoings, food shopping and transport costs.


That’s why some people choose to buy income protection insurance (often called permanent health insurance although not to be confused with health insurance, which covers the cost of private medical care). Income protection insurance primarily covers accident or sickness but often there is the option to include redundancy cover.  , also called unemployment insurance. This type of policy generally provides cover for the long term, often a retirement date although there is another type of policy There’s also an extended version of this called accident, sickness and unemployment cover. (not be confused with health insurance, which covers the cost of private medical care) Accident, Sickness and Unemployment cover will often just provide cover for a shorter period, normally one or two years.


Here’s how it works.


If you have bought an income protection insurance policy and you lose your job, you will be paid a tax-free monthly income, which starts after a pre-agreed waiting period. This is sometimes often called the deferred period. The longer this period is, the lower your premium, so it’s worth working out how much redundancy pay you could potentially receive from work, to see how long you could last before the insurance would be needed.


If you have chosen accident, sickness and unemployment cover, you are likely to have higher monthly payments, but you will receive a payout if you have an accident or an illness that means you are unable to work for a certain period of time. Again there is a waiting period with this kind of policy.


With income protection, you can choose to protect up to 50% of your monthly pay or you can just cover your mortgage, loan or debt repayments.


If you work for an employer, you may already have some cover against accidents and illness. If you’re self-employed you won’t have this kind of back-up, so this policy might be very important for you.


Comparing income protection


The good news is that it’s easy to compare the different levels of cover and prices with comparethemarket.com. Just fill in our online form with your details and the kind of cover you are interested in. It only takes a minute or two. We will ask whether you specifically want to cover yourself for loan repayments, a mortgage, your rent or your overall income.


You then put in the details of the loan or income, and choose which type of insurance you want to compare. You’ll then see a page listing all the quotes in price order, with the cheapest at the top. There are also different tabs you can select to view the different kinds of cover and how much they would cost.


Make sure you look at all the details of the policy, not just the price, as they will be slightly different in what they do and don’t cover, the length of the waiting period and possibly other features. You can also call to speak to an expert if you have any queries.


Once you have chosen the right cover for you, click to go to the insurer’s website and buy the policy. Again make sure you read all the details.


Do you need life insurance?


Many people that buy unemployment insurance also buy life insurance. This is designed to provide a large sum of money to your partner and/or children if you were to die. A lot of people buy life cover to provide enough money to pay off the mortgage, so that their family won’t have the worry of paying for their home when they aren’t around. The funds could also be used for funeral costs, debts or support in some other way.


There are a few trigger points in life that might make a person think about buying a life policy. Buying a home is one of these, as this could mean that your partner or family could inherit a mortgage free home.


Another is getting married or settling down with a partner. A third is starting a family. A life policy can be a pretty important thing to have in place and could mean a great deal to the people left behind if you were to die.


Comparing the options


With comparethemarket.com it’s easy to compare life insurance. On average it takes about three minutes (we’ve timed it!) to get to a list of life insurance quotes tailored to you.


First you need to decide whether you want to look at single cover or joint life insurance. With joint cover you may pay a little more, but you will get a payout upon the death of either of the insured people on the policy. Note that when this type of policy pays out once the policy will end, so the remaining person will need a new policy.


Next you need to set a time limit on the cover – enter the number of years you want it to last. This might match up with the amount of time left on your mortgage, or when you think your children may be independent and no longer need your financial support.


Then you just need to tell us whether you have smoked or used anything containing nicotine in the last 12 months. Because of the health risks linked with smoking, insurers usually charge more for a smoker’s policy.


Next you’ll see a page with every life insurance quote from the providers that can cover you, listed in price order with the cheapest life insurance at the top. Remember, cheap life insurance isn’t necessarily the best life insurance, so do read the details carefully before you buy.