Income Protection

Typically the maximum monthly benefit that an insurance provider will pay to you is 50% of your gross monthly salary. Therefore, if you earned £24,000 per year and found yourself unable to work due to an accident, illness, sickness or injury, the maximum amount you would receive is £1,000 per month.

It's important to consider exactly how much cover you would require as it may transpire you need less than 50% of your gross monthly salary (consider financial commitments such as a mortgage repayment, council tax, food and clothing costs etc).

There are a few additional factors that the insurer takes into consideration when calculating your monthly premium:

Occupation – the insurer will allocate a 'risk' rating to each occupation. For example, an office worker can expect to pay a lower monthly premium than a dog handler, on the basis that the latter has a higher chance of being off work due to an accident.

Waiting Period – also known as a 'deferred period' - if you are prepared to wait longer before you make a claim then your monthly premium will be less than somebody who requires payment sooner from the insurer. Your employer may provide you with 3 months sick pay for example, or you may have savings to replace the loss of income for a few months, in which case you can specify a longer waiting period and pay less per month as a result.

Retirement Age – typically you will want to protect your income until you retire. Currently the most common retirement age and term of cover is taken until age 65 yrs. You may plan to retire earlier. The shorter the term, the lower the monthly premium is because the risk of a claim to the insurer is less.

There are many providers of Short-Term Income Protection and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at: www.moneyadviceservice.org.uk.

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