Coronavirus (COVID-19) – life insurance and income protection guide
Coronavirus (COVID-19) – life insurance and income protection guide
With the outbreak of the coronavirus, many people are worried about their jobs and their incomes. See more about claiming on income protection insurance and what other sources of help are available.
Coronavirus: a guide to income protection insurance
Please note: The information in this article was correct at the time of publication on 6 April 2020 but because of the impact of COVID-19 things are changing rapidly. We aim to keep this page updated. But check with your insurance provider or potential provider directly, to confirm any details.
What is the Government doing to help employers to pay wages?
Fortunately, the Government has stepped in to help to pay some people’s wages and to attempt to enable companies to keep their staff in employment.
A Coronavirus Job Retention Scheme has been set up. Any employer in the country – small or large, charitable or non-profit – is eligible for the scheme.
If companies can’t cover all their staff’s salaries because of coronavirus, they could get a Government grant to cover the wages of employees who, without it, would have been made redundant. See Government advice here on paying employees’ wages.
Government grants will cover 80% of the salary of retained workers, up to a total of £2,500 a month.
It means workers in any part of the UK should hopefully be able to retain their job, even if their employer can’t afford to pay them, and be paid at least 80% of their salary.
The Coronavirus Job Retention Scheme will cover the cost of wages backdated to 1 March and will be open initially for at least three months. The Government says it will extend the scheme for longer if necessary.
Many employees should continue to receive most of their salary as normal, even if they’re not working. This means if you have an income protection policy, you may not need to claim on it.
What is the Government doing to help the self-employed with their earnings?
The Government has taken steps to try to help self-employed workers. If you’re self-employed, you could claim for a grant worth 80% of your monthly average profits, up to a limit of £2,500, for the next three months.
The initiative is open to anybody who has yearly trading profits below £50,000. To apply for this grant, you must have filed your tax return for 2019 and most of your income must come from self-employment. For more details, see the GOV.UK website.
What is an income protection policy?
This type of policy provides a monthly payment to help replace income lost through not being able to work because of an accident, illness or redundancy.
The money can be used to help replace part of your wage/salary that would be used for bills, mortgages or rent. An income protection policy could help to cushion any potential financial hardship and it may provide more peace of mind.
If you wish, you can see more details about how income protection policies work
Will income protection pay out if I’m off work with coronavirus?
Fortunately, most people who get coronavirus recover quickly, usually within a few weeks. Most income protection policies have a minimum claim period of 30 days. If this was the case, you wouldn’t be eligible to make a claim.
Instead, if you’re off work because of coronavirus, you’re likely to be covered by Statutory Sick Pay (SSP) from your employer. The Government has moved to make this available from day one of being off sick, rather than day four. SSP is now also payable to people who are self-isolating because of the virus.
Those who don’t earn enough (an average of £118 a week) to be in receipt of sick pay, for example, because of zero hours contracts, will need to claim benefits.
The Government has promised that it’ll be easier to do so. See more on Universal Credit and how to claim.
If you’re self-employed and you’re not ill enough to be signed off for the required amount of time to claim on your income protection policy, you’ll need to claim benefits. The Government has said every self-employed person could access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees.
If you’ve recently become self-employed, you may also be able to claim Employment and Support allowance.
If you’ve recently taken out an income protection policy, it should pay out provided you didn’t already have the virus when you applied and you fulfil the other necessary criteria. If you did have coronavirus when you took out the policy, it would be considered a pre-existing condition and therefore would not be covered.
You have to declare any other pre-existing conditions when you take out a policy.
How will COVID-19 affect unemployment cover?
Businesses hard hit by COVID-19 are entitled to help from the Government to see them through this difficult time. However, some businesses might cut their workforce to help them manage the crisis.
Existing policyholders (beyond any initial exclusion period) should be able to claim if this happens to them. This is exactly what you purchased the policy for – to cover you against enforced redundancy and unemployment.
At Compare the Market, our priority is to ensure that our customers can be confident the product they purchase is going to meet their requirements. Due to the current situation caused by the Covid-19 outbreak, we’ve decided to temporarily stop our comparison service for Unemployment cover. However, we’re still able to provide comparison for Accident and Sickness cover.
We’ll resume Unemployment insurance comparison as soon as we’re sure that the prices presented will meet the needs and expectations of our customers. We’ll be informed by Government advice and we’ll continue to work closely with our insurance partners on this issue.
I don’t have income protection? What can I do?
If you don’t have income protection and are suffering hardship, you should see whether you’re entitled to benefits. For example, if your employer is now paying you just 80% of your wages and you can’t manage without your full pay. You may be able to claim Universal Credit and if you have been made redundant, Jobseeker’s Allowance.
The Government has promised to try to speed up claims and payments.
You may also be able to ask for a three-month mortgage holiday from your provider. See more information on the Government website
If you rent, the Government is putting in place rules to suspend new evictions from social or private rented accommodation while this national emergency is taking place. At the end of this period, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances. Speak to your landlord about potential options.
Can I get a new income protection policy now to cover me?
Due to the outbreak of coronavirus (COVID-19), some income protection insurance providers have decided to stop offering new insurance policies. Others are reviewing the basis on which they’ll offer it, with the potential for coronavirus-related exclusions to be introduced.
If you buy insurance cover now, pre-existing conditions aren’t going to be covered.
However, remember that all cover should be bought for the short, medium and long term.
As mentioned earlier, because of the current situation caused by the coronavirus outbreak, we’ve decided to temporarily stop providing comparison for Unemployment cover. However, we’re still able to provide comparison for Accident and Sickness cover.
Our Unemployment insurance comparison service will begin again, when we’re sure the prices presented will meet the requirements of our customers. We’ll be informed by Government advice, and will keep working closely with our insurance partners on this matter.
What effect will self-isolation have on an income protection policy
Most income protection policies won’t cover you for the first 30 days – and the Government is currently only recommending 14 days of self-isolation if there is coronavirus in your household.
The 14-day period starts from the day when the first person in the house becomes ill. However, changes in the 2020 Budget mean that anyone advised to self-isolate may be able to claim Statutory Sick Pay.
- New style Employment and Support Allowance will be payable to people directly affected by COVID-19 or self-isolating because of Government advice from the first day of sickness, rather than the eighth day.
- People will be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 (or self-isolating), without the current requirement to attend a jobcentre.
- For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those directly affected by COVID-19 or self-isolating according to Government advice for duration of the outbreak. This ensures self-employed claimants will be compensated for losses in income.
Where can I get more help to find out what I’m entitled to if I’m struggling financially?
There’s lots of help available to make sure that you can claim everything you’re entitled to.
See more on measures to support those affected by COVID-19.
If you’re worried about debt and need help, see where you can get free debt advice
Citizen’s Advice also offers help on claiming benefits. See the advice for
Make sure you follow Government advice to avoid catching the coronavirus, to keep you and your loved ones safe. See Government health advice for dealing with COVID-19.