Income Protection insurance is designed to provide an income if you can’t work due to illness or injury. Find out more about the different types and the differences between Long Term and Short Term Income Protection.
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Income Protection insurance is designed to make sure you continue to receive an income, if you can’t work due to illness or injury. There are two main types; long term and short term. It’s important to understand the difference between the two before choosing the right policy to suit your needs.
In this section, we’ll explain what the different types mean and how they differ from other types of cover.
Short term Income Protection is an affordable alternative to a long term policy, that will continue to pay a benefit should you become unable to work due to illness or injury. A short term policy will have a maximum claims period, usually for one or two years at a time.
Once you reach the maximum claims period, you would have to return to work in order to claim again on the policy.
A long term policy will provide a regular, tax-free income if you’re unable to work due to injury or illness. It will protect you against accident and sickness, including mental illness.
Long term Income Protection insurance will usually cover a set amount of your income, usually between 50-70%. Some policies will allow you to claim more than once, so if you fall ill and then recover, but fall ill again, you can still claim.
If you suffered from a serious disease or condition, a long term policy could pay out until you pass away or become well enough to work again. Most policies have a minimum term of 5 years.
There is usually a deferred period with Income Protection insurance, which refers to the time you’d have to wait before the policy kicks in. It makes sense to set the deferred period to end when your employee sick pay stops.
In some cases, the longer the deferred period, the lower your premiums could be.
There are different levels of cover for Income Protection insurance. The first is known as own occupation, which lets you make a claim if an accident or illness prevents you from carrying out your own job.
The second is working tasks, which means you’ll receive a pay-out if you’re unable to perform basic living tasks, like walking or lifting objects. This lower level of cover is more restrictive.
Critical Illness cover will pay a lump sum if you are diagnosed with a specific illness. It usually has to meet a policy definition. On the other hand, Income Protection insurance will pay a regular income for a set period of time. Income Protection will pay out if you’re deemed too ill to work, regardless of the condition.
Find out if you have any other benefits before taking out cover such as Income Protection. You might already be eligible for group Income Protection insurance from your employer, or other sick pay agreements.
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** Premiums and payout based on a healthy non-smoker who is an office worker and doesn't have a hazardous lifestyle up to the age of 65. The premium shown is based on Aviva's Income Protection + Plan and is subject to a full underwriting process. Prices are correct as of January 2022.
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This calculator is for informative purposes only and is not to be taken as financial advice, for accurate financial advice please consult with an advisor from Caspian Insurance.