What is income protection?
Income protection is also commonly called “sickness” insurance. This is because it protects your accounting liquidity in the event of illness or disability which might temporarily prevent you from working.
What happens when you are not insured and you cannot go to work because of illness?
If you are employed in the United Kingdom, but have been affected by illness or disability, which prevents you from working and you have to be on sick leave, then you are entitled to a statutory benefit. Unfortunately, in the UK the benefit you receive during your absence from work is less than £100 per week. It means that – at current rental prices – if you rely solely on that benefit, you will not be able to pay your rental costs for one room.
Why is it worth having income protection insurance?
If you decide to purchase income protection insurance, you can be sure that you will not be left destitute in the event of illness or accident. In case of a long-term absence from work, you will not have to reach for your savings, and you will avoid the uncertainty as to how long they will last. Under this policy, you will be receiving a monthly benefit of up to 65% of your monthly salary – until you return to work.
What is deferred period, or – in other words – which moment of your sick leave does insurance payment commence at?
You choose the moment of your policy commencement yourself, depending on your needs. The period between your incapacity for work and the first insurance benefit payment is called deferred period. It usually ranges from 4 to 52 weeks, and you decide on how long this period is. There is also the option of the individual sickness benefit, the so-called sick pay, aimed primarily at high-risk occupations as the employees are more likely to suffer from illness or disability. This option allows you to receive the insurance benefit from the first day of your incapacity for work (unless the absence from work is shorter than 3 days).
Who is entitled to income protection insurance?
Income protection insurance is a solution for contractual employees as well as self-employed people. In both cases the insurance will cover your costs of living and protect you against the loss of your liquidity in the event of long-term absence from work. Elderly people can also purchase such insurance if they are afraid that due to health reasons they will have to stop working before their pension rights are determined. In such a situation, income protection insurance will provide them with regular income from the moment of their incapacity for work until the day they reach retirement age. Income protection is also an essential insurance for people practicing high-risk occupations and thus are more prone to illnesses and accidents. With this kind of insurance, they can be assured that in the event of loss of income neither they nor their family will be left destitute.
Are you wondering if you need income protection insurance or which deferred period would be the best for you? Contact us and talk to our advisor who will help you choose the best insurance for you. The consultations are conducted in Polish or English – according to your preference.