Tom Lenton talks income protection

With redundancies and job losses on the rise, we thought we’d use this month’s ‘Tom Lenton talks’ to discuss income protection. Knowing which product works best for you and what you’ll be covered for can make it difficult to know where to start. Here, Tom tell you what you need to know if you’re thinking about taking out income protection.

What are the differences between the types of income protection available?

‘Before we get to the differences, it’s important to understand that both income protection (IP) cover and sickness and unemployment cover (ASU) will protect your income, but they do it in different ways.

‘With IP cover, you can choose how much of your monthly salary (typically 50% but could be more ) you want to protect, and the policy will pay that amount if you become too ill to work or have an accident that means you can no longer do your job. It’ll pay out until you retire if needs be.

ASU is where you set a monthly amount to replace your salary for 12 or 24 months if you’re ill or lose your job. It’s up to you how much that figure is, as you know how much you’ll need to cover your bills. Unlike IP, ASU will cover redundancy, but you might need to wait a bit longer to claim for it.’

How do the costs compare?

‘IP is generally more expensive as the cover is more comprehensive, although how much you pay depends on things like your age and occupation, as well as how long it takes for the policy to give you an income and how long it’ll pay out for.

‘ASU is a bit like home or car insurance, as you’ll need to renew it every 12 or 24 months, so you won’t always know how much you’ll pay in advance. And it’ll go up if you make a claim or anything changes from your previous policy.’

How simple are the claims processes?

‘This will depend on individual policies, but ASUs will usually check if you’re eligible when you come to make a claim, again, very much like car and home insurance providers do, which could slow things down. IP, on the other hand, is medically underwritten when you apply, so you’re usually in a better position when it comes to claiming.’

Will they affect my work sick pay?

‘IP and ASU policies usually kick in after any employers’ sick pay finishes, so they won’t affect it all.’

Can I take out income protection if I’m self-employed?

‘Yes, IP and ASU will cover self-employed income in the same way as it does for employment income. Some policies might give you different levels of cover or be specifically designed for being self-employed.’

Can I have more than one income protection policy or both IP and ASU?

‘There’s nothing stopping you having several policies running side-by-side. Just be aware that IP can only cover up to 50% of your monthly salary no matter how many policies you have. If you want to double up and have IP and ASU, you can do.’

Hopefully, you now know your IP from your ASU, but if you need any more info, or would like to talk to Tom to take the next step, please get in touch.