With this type of long term policy, there are a number of things to consider, such as:
- How long does the cover last?
The minimum term for most policies is usually 5 years with the maximum term taking you to the age of 70.
You might wish to set the policy length equal to the age at which you plan to retire. In that way you’ll have earnings cover in place for the rest of your working life.
- How much income can I cover?
This depends on how much you earn and the premium you choose. In many cases, the amount you can insure is set as a percentage of your pre-tax earnings. This can be up to 70% but could be lower if you’re a high earner.
Think about how much you want to protect. For example, as a minimum you’d want to cover your essential monthly outgoings, rental or mortgage payments, household bills, any debt obligations and then an allowance for every day spending.
- What is a deferred period?
The deferred period is the period you’d have to wait before the policy kicks in and starts delivering benefit. It would make good sense to try and set this period equal to the length of time that your employer would pay you full sick pay should you have to go off work. This can vary significantly from employer to employer.
Something to note is the longer the deferred period, the lower your premium is likely to be.
- Do all policies cover unemployment?
Although most long term income protection policies are designed to cover accident and sickness, some policies have an option to include some short term redundancy protection.
The insurance market is very competitive which means it’s a really good idea to compare policies and prices. You can call our team at Assured Futures on 0808 141 1245 (Mon – Thurs: 8.30am – 7pm, Fri: 8.30am – 5pm, Sat: 8.30 – noon) and one of their advisors will be able to guide you.