Your home, car and possessions can all be insured, but what about the income that pays for them? In this chapter, we'll explain how Income Protection works, who it's designed for and why many financial advisers consider it one of the most valuable forms of protection available.
By the end of this chapter you’ll understand:
✓ What Income Protection is and how it works.
✓ How Income Protection differs from Critical Illness Cover.
✓ Why protecting your income is so important.
✓ Who should consider Income Protection.
✓ Common misconceptions about Income Protection.
Estimated Reading Time: 10 minutes
Income Protection is designed to pay a regular monthly income if you’re unable to work because of illness or injury. Unlike Life Insurance or Critical Illness Cover, which usually provide a lump sum, Income Protection is designed to replace part of your earnings while you’re off work.
Payments usually continue until you return to work, your policy ends or your chosen benefit period finishes, depending on the type of policy you’ve selected. The aim is simple: to help you continue paying your mortgage, household bills and everyday living expenses while you recover.
Why do people choose Income Protection?
For many people, their monthly salary is what keeps everything else running. If that income suddenly stopped, it could quickly become difficult to meet regular financial commitments. Income Protection is designed to provide reassurance during those uncertain times.
✔ Help keep paying your mortgage – Your mortgage payments don’t stop if you’re unable to work. Income Protection can help you stay on top of your monthly commitments.
✔ Support your family – Your income often supports much more than just your mortgage. It helps pay household bills, childcare, food, transport and everyday living costs.
✔ Focus on your recovery – Instead of worrying about your finances, Income Protection allows you to concentrate on getting better.
Although both protect your finances, they work very differently.
Critical Illness Cover – Usually pays a one-off lump sum if you’re diagnosed with a specified serious illness covered by your policy.
Income Protection – Provides regular monthly payments if illness or injury prevents you from working, regardless of whether it’s a specified critical illness. Many illnesses or injuries that stop someone working may never result in a Critical Illness claim, which is why many people see these products as complementing one another rather than replacing each other.
Stop & Think
Imagine you couldn’t work for the next 12 months because of illness or injury. Ask yourself:
These are difficult questions, but they’re exactly why Income Protection exists.
People often tell us they have Life Insurance but have never thought about protecting their income. In reality, your ability to earn a living is often what enables you to pay your mortgage, support your family and enjoy your lifestyle. For many people, it’s their most valuable financial asset.
Many people associate Income Protection with serious accidents, but the reality is that many long-term absences from work are caused by illnesses that can affect anyone, such as a bad back!
Income Protection isn’t designed for the unlikely, it’s there to help if illness or injury prevents you from earning an income, regardless of how it happens.
✔ Income Protection replaces part of your income if illness or injury prevents you from working.
✔ It provides regular monthly payments rather than a one-off lump sum.
✔ Your income is often your biggest financial asset.
✔ Income Protection complements Life Insurance and Critical Illness Cover rather than replacing them.
✔ The right policy depends on your occupation, income and personal circumstances.
Next Chapter →
Home Insurance Explained
We’ll explain the difference between Buildings Insurance and Contents Insurance, what each one covers and when your insurance should begin.
