If you couldn’t work for several months due to illness or injury, could you manage financially? Whilst you might have savings to tide you over for a short period off work, if it went on for longer, you might find it a struggle to meet mortgage costs and household bills. That’s where income protection insurance comes in.

How income protection policies work

These policies are designed to pay out if you’re not able to work and earn money due to illness or injury, and, in some cases, forced unemployment. They provide valuable protection for breadwinners, the self-employed, and employees who receive limited or no sick pay from their employers.

There are various types of policy available, such as guaranteed policies premiums which remain constant throughout the policy term, reviewable policies where premiums are periodically in-line with your age and state of health, and age-related policies where premiums increase in-line with your age.

The maximum claimable amount is usually net monthly earnings after tax, minus any state benefits. This could be around 65% of your gross earnings and it’s usually tax-free.

Policies pay out following your chosen deferred period, typically between four and 52 weeks, and can continue until you return to work or the policy expires at the end of a fixed period.

There’s a wide range of policies and benefits available; talking to your adviser will help you make the right choice.

As with all insurance policies, conditions and exclusions will apply.