Income protection insurance

If you took out income protection insurance before the COVID-19 pandemic began, you should still be covered if you’re made unemployed or are seriously ill from coronavirus. However, you should check your policy wording, in case there are any listed exclusions. In most cases of COVID-19 though, illness is mild and you probably won’t need to rely on income protection insurance. You should be fine to take standard sick leave.

In terms of getting a new income protection insurance policy, we’re currently unable to offer comparison for unemployment cover, as some insurance providers aren’t offering policies. If you’re looking for accident and sickness cover, you should be able to find cover.

Yes, you can. Because the policies are designed to help over different time periods and in different situations, having a combination of policies will offer the greatest protection – but you will be paying multiple premiums. For example, you may want ASU cover to protect you for redundancy and a PHI policy to cover you if illness or accident stops you working.

Remember, too, that every policy has a minimum claim period of 30 days. This means that if you’re not off work for a full 30 days, you can’t make a claim. Policies may also have an excess period. This is the time after you’ve been signed off work or become redundant that you won’t be covered for.

In some cases, the excess period will be nil, meaning you can claim back to day one, providing you’ve been off for the minimum claim period. But the whole of the minimum claim period has to elapse before you can be paid. This is the same for accident and sickness only, unemployment only and ASU policies.

If you’re employed, you want to take into account any benefits offered by your employer - like sickness benefit - when deciding on how much cover you need and what the excess should be.

If you’re self-employed, you’ll need to consider how long you can afford to wait before your policy kicks in when selecting your policy and excess period.

It’s also important to remember the maximum limits, which may be 50%-70% of your monthly salary, no matter how many policies you have.

Not at all. The idea is that the insurance policy takes over when your sick pay ends. If you fall ill, some employers will still pay your salary for a set period – sometimes for up to 12 months. Check how much your employer will give you and for how long.

The longer you receive a salary, the longer you can make your deferment period (the length of time you have to wait before pay-outs begin). Many policies won’t pay out if you’re still receiving a salary.

If you’re self-employed, you won’t be entitled to typical employee benefits, like sick pay or redundancy pay, so income protection is something you should consider. It can give you the peace of mind that you’re financially protected if you’re unable to work.

Find out more about self-employed income protection.

Income protection usually only covers part of what you earned before you were unable to work; typically, around 50 to 60% of your gross monthly income.

Passive income comes from an enterprise that a person isn’t actively involved in, like money earned from investing in shares. Some providers will include passive income as long as it’s directly related to your work activities. This could be in the form of dividends, bonus, commissions and benefits in kind. Make sure you read the policy terms and conditions, so you fully understand your insurance provider’s definition of ‘income’.

If you have short-term income protection, unemployment insurance or a bundled ASU policy, you should receive a pay-out if you lose your job.

However, you won’t be able to claim if you buy a policy after your redundancy has been announced. It’s also very unlikely you’ll receive a pay out if you take voluntary redundancy.

Check the terms and conditions before you buy to make sure you’d qualify for unemployment protection.

You’ll be able to keep the same policy if you change jobs, but you should let your insurance provider know. If your new job is considered a higher or lower risk, the cost of your premiums could go up or down.

Also bear in mind that if your salary goes up, you may want to increase your cover amount. On the other hand, if your new role comes with a generous sick pay benefit, you might want to decrease the level of cover.

Yes, you can get income protection insurance if you’re a stay-at-home parent. Income protection insurance could be useful to cover the costs of childcare and essential household tasks, like cleaning and laundry, if you’re laid up for a while.

Short-term income protection usually lasts between six to 12 months, although some policies will cover you for up to two years.

Long-term policies usually last for a minimum of five years, but can continue right up to retirement age or even for the rest of your life.

In both cases, before you take out a policy, you should check the details to make sure you’ll be covered for the time period you want.

All unemployment policies have an initial exclusion period. This is a 90 to 120 day period, depending on the insurance provider, in which you’re unable to make a claim. This is to safeguard the provider against people taking out a policy when they’re aware they’ll be made redundant in the near future.

No. If you die, your income protection insurance will no longer be valid. If you have dependents who rely on your income, you may also want to consider taking out life insurance. This will give your family financial protection if you die while the policy is running.

Insurance providers may look at your credit file to make sure you’re telling the truth about who you are and where you live. If insurance providers need to access this information on your credit file, it will be a ‘soft search’ and won’t affect your credit score.

But if you have a poor credit rating, some insurance providers may not offer you income protection if they think you’ll have trouble with the repayments.

Just remember that if you have several debts, income protection is only designed to cover your regular income. If you’re already in debt, it could help to pay off what you owe but won’t necessarily be enough to pay off all of your debts. Taking on more repayments, even to protect your income, could lead you into further debt.

It’s easy to compare prices and different levels of cover with Compare the Market. Just use our income protection comparison service and fill in your details and what cover you’re interested in. It only takes a few minutes to see what quotes are available to you. The insurance market is very competitive, so it’s a good idea to compare policies and prices to get the right cover at the right price.

Make sure you check the details of the policy, not just the price, as they all offer slightly different cover. How your provider defines an inability to work can also affect when they will pay out, so make sure you are clear about what this means for your policy.