HELPFUL INFORMATION

Have a few more questions about how Income Protection works? Then our Helpful Information guide may have the answers you’re looking for. We’ve got the answers to some of the most frequently asked questions concerning the policy. However, do feel free to call and chat to one of our sales advisers if you still have any other queries. Your question may even end up in our guide!

Helpful Information
I'm already out of work, can I set up an income protection policy?

Unfortunately, if you’re already off work due to illness or injury, you cannot set up an income protection policy. Your income cover must be set up while you are still working so it covers you for a future illness or injury. However, this doesn’t mean you can never have a policy. Once you’ve returned to work for 12 months, please feel free to come back to us. We’ll help you set up the best income cover for you so you can protect yourself from any illnesses or injuries that may occur in the years to come.

What is most commonly covered by Income Protection Insurance?

The most common illness covered by Income Protection in 2018 was musculoskeletal issues, accounting for 33% of LV=’s claims, 44% of British Friendly’s claims and 30% of claims across the entire income protection market. For LV=, the next most common illness was cancer related issues at 23% while British Friendly paid 17% of their IP claims on viral illness. Mental health issues also made up for a high percentage of claims across the two insurers.

Can I get cover if I claim on mental health issues?

Some Income Protection policies will cover you for mental as well as physical illnesses. So, on these policies there will be less barriers to claiming if you need time away from work.

Can I get Income Protection if I am self-employed?

Yes, you can. There are no issues with buying Income Protection if you’re self-employed, whether you’re a sole trader or a company director with a few dozen employees or more. The self-employed can receive income cover in two different ways. Sole traders are covered for up to 70% tax-free of their profits before tax (revenue – costs before tax). Company directors are covered for a tax-free 70% of their pre-determined salary. Their dividends are also partially covered if they own a share in their limited or publicly traded company.

Do I pay tax on Income Protection payments?

No, you do not pay tax on policies bought through Protect My Pockets. This is because on most income protection policies, the tax you would usually pay is covered within your premiums. This is the same no matter if you were insured through an insurance broker or went directly to an underwriter.

Is Income Protection the same as payment protection insurance (PPI)?

There are many differences between income protection and PPI. PPI is a policy designed to cover the repayments of a single loan in the event you leave work due to illness or injury, lasts 12-24 months and has a list of excluded illnesses that could stop the policy from paying out.

Income Protection on the other hand is a policy designed to pay 70% of your monthly earnings tax free directly to you in the event you leave work due to illness or injury. This income cover lasts for as long as you need it, whether you return to work, claim until your policy ends or you retire, and has full up-front medical underwriting to cover several circumstances. This means that unlike PPI, Income Protection is designed to work for you, and only you.

What determines my level of Income Protection cover?

The quoted cost of your premiums will depend on your general health, smoking status and how long your deferral period is before you can claim upon illness or injury. A deferral period refers to the time between leaving work for illness or injury and the claim starting to pay out. Once that has been sorted, not only are your premiums guaranteed with flexible payment plans but if you move into a job where you earn less money, your policy can change to best suit your new circumstances.

What isn’t covered by Income Protection?

Without taking out additional insurance policies, Income Protection will not cover you for unemployment or redundancy. You need to be working and a UK resident when you buy your policy and it is designed to cover illness or injury until you return to work, retire or your policy term ends, whichever comes first. You may also struggle to get income cover if you have a pre-existing condition or have suffered a life-threatening condition before (i.e. a heart attack or a stroke). This does not mean you shouldn’t make an enquiry however, as we may be able to find you another policy more suited to your needs.

How good are insurers for paying out on Income Protection?

On average, 88.1% of Income Protection claims were paid out by British insurers in 2018 (FTAdviser). This is mainly due Income Protection having up-front medical underwriting, so people know exactly what kinds of illnesses and injuries are covered by their policy and if they have a good chance of being paid out.

Why is Sports Injury Cover classed as Income Protection and not Life Insurance?

At its core, Sports Injury cover is a type of income protection policy that pays out on injuries or illnesses related to sport. They both pay out a percentage of your regular monthly income until you either return to work, retire or your policy term ends. While some sports injury policies may include cover for accidental death during a sporting activity, this is not usually offered as standard and is largely designed to cover lost income.

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