News & Blog

The ins and outs of Income Protection

16th September 2020

Given the current climate, it is not surprising that income protection is a key concern for many people. Income protection is an insurance policy that pays out if you are unable to work due of injury or illness.

Despite it being an important type of protection, traditionally it has been one of the least popular products that people take out. According to a survey by Which? only 9% had income protection compared with 41% with life insurance and 16% with private health insurance. It is, however, important for most U.K adults of working age to at least look into this area of protection as very few employers will cover your salary for more than a year if you find yourself unable to work.   

The cost of income protection depends on factors such as your health, whether you smoke and how much cover you need. Insurers also consider the level of risk in your job. Other factors that can affect premiums is whether the policy is index linked, contains a deferred period, or contains a stepped benefit.

Some insurance providers have started adding coronavirus exemptions or pulling out of the income protection market altogether. However, others have shown quite a bit of flexibility by offering payment holidays for vulnerable cases or offering the option to put policies on hold. It is important to read the terms and conditions of a policy before taking it out to ensure you would be covered in the event you needed to make a claim.

A policy will pay out only a proportion of your earnings in the event of sickness, tax free, although sometimes this is capped. Policies usually pay out for the duration of the policy term, until you are able to return to work, or until you retire, whichever is soonest. Most policies will not pay out until a pre-defined waiting period has passed. The length of waiting period will vary between providers and you should clear on what this would be before taking out a policy.

If you’re thinking of buying income protection to cover the COVID-19 outbreak, it’s unlikely to pay out if you’re only ill for a short while or are self-isolating. Most policies are designed for long-term absences. By the time the waiting period is has passed, your period of illness or self-isolation could be over, and you could have gone back to work. 

Please talk to us to see if we can help you with equity release. Get in touch with us on 01609 760960. Or arrange a call back and one of our mortgage brokers will be happy to help. 

 Reference – BL106 – Sep – 2020


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Gale and Phillipson Investment Services Ltd, Gale and Phillipson Advisory Services Ltd, Gale and Phillipson General Financial Services Ltd and Gale and Phillipson (SE London) Ltd are all authorised and regulated by the Financial Conduct Authority (Reference Numbers 431387, 142752, 195080, 195522).  Gale and Phillipson (Herts) Ltd and Gale and Phillipson Consulting Ltd are appointed representatives of Gale and Phillipson Advisory Services Ltd.  Gale and Phillipson (Surrey) Ltd is an appointed representative of Gale and Phillipson Investment Services Ltd. (Reference Numbers 615821, 811525, 703337). All companies trade under the name Gale and Phillipson and are registered in England and Wales numbers 05409822, 02232959, 03751076, 04077157, 08864945 and 04823391.  Registered office for all companies is Gallowfields House, Fairfield Way, Richmond, DL10 4TB.

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