Income Protection Insurance

Protection Against Illness or Injury

Income protection insurance is a crucial financial product that provides policyholders with a replacement income if they are unable to work due to illness or injury. The origins of income protection insurance date back to the late 19th and early 20th centuries when mutual aid societies and trade unions provided financial support for workers who could not earn a living due to health-related issues. Over time, these informal arrangements evolved into structured insurance products offered by financial institutions, providing individuals with greater security and peace of mind.

What We Do

Statistics show that a significant percentage of individuals will suffer from an illness or injury that prevents them from working at some point in their lives. The Office for National Statistics (ONS) reports that one in three people will be unable to work for at least six months due to a medical condition before reaching retirement age. Without income protection insurance, individuals may struggle to cover essential expenses such as mortgage payments, rent, utility bills and daily living costs. One of our financial advisers can help you compare income protection insurance to find the best cover for you and your unique circumstances.

The Importance of Income Protection

Income protection payments can make all the difference to your circumstances if you find yourself unable to work due to illness or injury - supplementing your monthly income with insurance means that you can focus on recovery, rather than worrying about providing a salary.

Why Get Income Protection Insurance?

For employed individuals, having income protection insurance ensures they can maintain their standard of living even if they are unable to work for an extended period. While some employers offer sick pay, it is often limited in duration and does not fully cover an employee’s income. For self-employed individuals, the situation is even more precarious, as they do not receive statutory sick pay or employer-provided benefits. Income protection insurance is therefore an essential safeguard for freelancers, contractors and business owners who rely solely on their earnings.

What's Covered by an Income Protection Policy?

The most common reasons for income protection claims include musculoskeletal disorders like back pain and arthritis, and mental health conditions such as anxiety and depression. Cancer is a leading cause due to its impact on work capacity, while cardiovascular diseases like heart attacks and strokes often result in long-term absence. Neurological conditions, including multiple sclerosis and Parkinson’s, also frequently lead to claims due to their progressive effects.

The Risks And Need For Income Protection Cover

Where people who are employed by businesses might be better to consider critical illness insurance to cover them in the case of critical illnesses, others might need something to supplement their income if anything less serious should happen. It is important to evaluate if income protection and the risks associated with it are going to be right for you.

Who Needs Income Protection Insurance Cover?

Illness rates vary across different professions. According to the Health and Safety Executive (HSE), self-employed individuals in physically demanding jobs face higher risks. Those listed as the most at risk of needing to at some point claim for the income protection monthly benefit are: construction workers, electricians, plumbers, taxi drivers, personal trainers, hairdressers, freelance writers, self employed chefs, farm workers and tradespeople. Unlike with a life insurance policy where policy holders recieve one lump sum payment, with income protection cover people who are affected by being out of work can claim a monthly payout after their chosen waiting period to help them cover whatever costs they need.

The Risks of Income Protection Insurance

Income protection insurance carries several risks that you should be aware of. These include the possibility of exclusions or limitations in the policy that may prevent a payout, such as pre-existing conditions, specific illnesses or even certain occupations. There’s also the risk that the policyholder may overestimate their coverage, assuming it replaces full income when it often only covers a percentage. Premiums can be costly, especially for older individuals or those in high-risk jobs, and policies may become unaffordable over time, which is why it is essential to work alongside an independent financial adviser to analyse your personal situation to find the right outcome for your circumstances.

Our Services

According to the Association of British Insurers (ABI), there were approximately 1.5 million active income protection policies in the UK in recent years. If you rely on an income that would be at risk if anything should happen then it might be worth a conversation with one of our chartered financial advisers.

 

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Pay Out Rates

Payout rates for income protection insurance remain consistently high. According to industry reports, most insurers pay out over 90% of valid claims. Aviva reported a 93.2% payout rate, while Legal & General paid out 95% of claims in a recent year. However, some claims are denied due to non-disclosure of pre-existing conditions or failing to meet the policy’s definition of incapacity, so it is essential that your adviser fully explains the policy terms and coverage before you take out income protection.

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Further Benefits with your Policy

Beyond financial security, income protection insurance reduces stress during recovery. Some policies also offer rehabilitation and support services, helping individuals return to work sooner. For self-employed individuals, this insurance ensures they have a consistent income stream when no other financial safety net exists. Your financial adviser will work through your situation with you to understand everything from your financial situation to the types of benefits that could be included with your policy that might provide long term reassurance should anything happen.

Key Takeaways


Income protection insurance is a vital financial product that offers stability and security to individuals facing health-related work absences. With millions of policyholders in the UK, high payout rates and a significant likelihood of experiencing a long-term illness or injury, having coverage is a prudent financial decision. The financial impact of being unable to work can be severe, making income protection insurance a valuable safeguard for both employed and self-employed individuals. Industry experts recommend including income protection as part of your financial planning, to ensure that you can maintain your lifestyle and recover without undue stress.


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