Coronavirus (COVID-19) – income protection guide

With the continuation of the coronavirus pandemic, many people are worried about their jobs and incomes. See more about claiming on income protection insurance and what other sources of help are available.

With the continuation of the coronavirus pandemic, many people are worried about their jobs and incomes. See more about claiming on income protection insurance and what other sources of help are available.

Debbie Thompson
Life insurance expert
7
minute read
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Posted 1 FEBRUARY 2021

Coronavirus: a guide to income protection insurance

Please note: The information in this article was correct at the time of publication on 1 February 2021 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? 

The government has stepped in to pay some people’s wages and to attempt to enable companies to keep their staff in employment.  

The Coronavirus Job Retention Scheme has been extended until the end of April 2021. 

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 on paying employees’ wages

Government grants cover 80% of the salary of retained workers who become furloughed and temporarily inactive for their business, 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.

Since 1 July a flexible furlough scheme has been in place, allowing businesses to bring back furloughed employees on a part-time basis.

Firms are given the flexibility to decide the hours and working patterns of their staff – with the government continuing to pay 80% of salaries for the days they don’t work.

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. The Self-Employment Income Support Scheme grant has been extended until April 2021 in the shape of two grants available for three-month periods. One runs from November 2020 to January 2021, and the other from February 2021 to April 2021.

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. Payment for the period is made in a single instalment capped at £7,500. 

To be eligible, your yearly trading profits must be below £50,000. If you weren’t eligible for the first and second grant, you won’t be eligible for the third. For more information and to see how to apply visit 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've been used for bills, mortgage repayments or rent. An income protection policy could help to cushion any potential financial hardship and it might provide more peace of mind. 
 
If you'd like, 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. Last year the government 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 £120 a week) to be in receipt of sick pay - because of zero hours contracts for example - will need to claim benefits.   
 
See more on Universal Credit and how to claim it. 
 
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. You may be able to claim Universal Credit or 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 won’t 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 have cut their workforce to help them manage the crisis, and others might follow suit.  
 
Existing unemployment cover 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 pandemic, 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 you're 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've been made redundant, Jobseeker’s Allowance. 
 
The government has promised to try to speed up claims and payments.  

You could also consider asking for a mortgage holiday from your provider, up to a maximum period of six months, after the Financial Conduct Authority (FCA) confirmed an extension to its support scheme. Some existing payment holidays can be extended until 31 July 2021.

Find out more about mortgage holidays.

The government has extended its protection for renters, suspending new evictions from social or private rented accommodation until at least 21 February 2021.

See more information on GOV UK. 

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.  

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 10 days of self-isolation if there is coronavirus in your household.

The 10-day period starts from the day when the first person in the house experiences symptoms. However, changes in the 2020 Budget mean that anyone advised to self-isolate may be able to claim Statutory Sick Pay. 

  • Employment and Support Allowance is payable to people directly affected by COVID-19 or self-isolating from the first day of sickness, rather than the eighth day. Those affected can self-certify for the first seven days.     
  • 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 requirement to attend a job centre.  
  • The minimum income floor in Universal Credit will remain suspended until 30 April 2021. This ensures self-employed claimants can 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.