Do you have rent or a mortgage to pay? Do you have children or a partner who is dependent on your income? Do you want to protect your home and your quality of life in case you’re ever unable to work due to illness or injury? If you answered yes to any of these questions, you may want to consider getting Income Protection Insurance.
Income Protection Insurance (IPI) is a type of insurance that pays you a regular income if you are unable to work due to illness or injury. IPI can help you cover your living costs, such as your mortgage or rent, bills, and food, whilst you’re unable to work. As the cost of living has risen in recent years, ensuring you have the right insurance in place has become even more important. Without it, you could end up losing your home.
We’ve always ensured our mortgage customers are aware of the risks of not having the right insurance in place. But since the Consumer Duty came into effect earlier this year, we now have an explicit legal duty to ensure our customers fully understand the potential consequences of not taking out insurance. Whether you’re one of our mortgage customers or not, we provide a FREE Insurance Service to help you find and arrange the right policy for your needs, so please get in touch with our team to find out more.
What is Income Protection Insurance & How Does it Work?
Illness or injury can strike at any time and at any age. Although Life Insurance is recommended to protect against death, it does little to protect against illness or injury. Government benefits or sick pay may also not offer the protection you think it does. Soley relying on these could still lead to you losing your home if you’re unable to work due to illness or injury. This is where Income Protection Insurance comes in.
Income Protection Insurance pays up to 60% of your gross income (tax-free) until you are able to return to work or retire, or until the end of the policy (whichever comes first). The policies cover nearly every medical condition that leaves you unable to work, the money is paid as monthly income, and you can make multiple claims throughout the term of the policy.
Deferred Periods for Income Protection Insurance
If your work offers sick pay for a certain period, or if you have savings that you’d be happy to use, then we may recommend you set a deferred period to reduce the cost of your policy. A deferred period means the payment won’t kick in the moment you stop working. For example, if your work offers three months of sick pay and you have enough savings to cover a further three months of expenses, then you can set a deferred period of six months to make the policy more affordable. If you’d rather protect your savings as well, then you could set the deferred period for just three months.
Flexible Levels of Cover for Income Protection Insurance
There are also different levels of cover available. If you’d like full cover, you can arrange a policy that pays out until you retire or return to work. However, for a reduced premium, you can choose a policy that will pay out for a maximum of two years instead, but of course, this does come with more risk, as some conditions may take you out of work for longer than two years.
We can discuss all the available options with you for free and help you make the right choice for your situation – simply book a chat with one of our insurance experts to find out more.
Who Can Get Income Protection Insurance?
To get Income Protection Insurance you’ll need to be working at least 16 hours a week, either employed or self-employed. Insurers will also want to know the nature of your job and hobbies to assess your level of risk.
As with most forms of life, health or income insurance, insurers will look into your medical history (including any pre-existing health conditions) and lifestyle before deciding what cover they can offer you.
If you have a dangerous job, an unhealthy lifestyle, or a pre-existing health condition, you may have fewer options available to you and your premiums may be slightly higher. However, no matter what your situation, you can use our FREE Insurance Service to search the market and assess your options.
How Much Does Income Protection Insurance Cost?
We can’t give exact costs in this guide because there is so much variation between insurers and policies. If you’d like to get exact costs based on your circumstances, please use our FREE Insurance Service.
Factors that may affect the cost of your Income Protection Insurance policy include:
- Your age
- Your job
- Your hobbies
- Your lifestyle
- Your health
- Your level of cover
- Any deferred period
Should I Get Income Protection Insurance?
There are three main reasons you may want to consider getting Income Protection Insurance.
1. To Protect Your Mortgage & Home
If your income was lost (even temporarily) due to illness or injury, how would your family afford mortgage repayments? How long would it be until you’re in arrears? Without insurance, you may need to sell your home and then downsize or rent. Income Protection Insurance can pay out up to 60% of your income for a long time, allowing you to pay your mortgage and keep your home. You may also want to look into Critical Illness Cover, as this provides a lump sum payout that can be used to pay off your mortgage.
2. To Protect Your & Your Family’s Quality of Life
Without Income Protection Insurance, your family’s income could decrease drastically if you were ever unable to work. This would likely lead to some tough decisions. If you did manage to continue paying your mortgage with whatever income was left over, you’d likely have to cut back on holidays, hobbies, paid education and other luxuries. If you want to protect your family’s way of life, Income Protection Insurance can help. With up to 60% of your income still going into your bank account every month, you should have more chance of retaining your current lifestyle.
3. To Protect Your Savings & Future
If you have considerable savings, you may be able to pay off your mortgage if needed. However, the question we always ask our customers is ‘What are your current plans for those savings?’ The answer is rarely to pay off the mortgage. Usually, savings are for other things in the future, such as holidays, holiday homes, or retirement. Or perhaps you want to keep some money aside to help your children get on the property ladder or get married. If you have plans for your savings, we recommend considering Income Protection Insurance as a way to protect your future plans. Retaining up to 60% of your income should allow you to protect most of your savings and use the money for other things in the future.
When Should I Get Income Protection Insurance?
It’s most common to take out Income Protection Insurance when you have children or a partner who depend on your income to pay a mortgage, rent, school fees, or other bills. However, you may still want to consider Income Protection Insurance even if you don’t have a family that depends on you. Unlike Life Insurance, Income Protection Insurance is designed to protect you just as much as any family you may or may not have. If you’re not sure how you would afford your home, bills and current lifestyle if you were to lose your income, then you should consider insuring it.
If you do have dependents and you’re thinking of taking out Life Insurance to protect them, it’s common to take out Income Protection Insurance and/or Critical Illness Cover at the same time. Life Insurance protects your family in case you were to die, and Income Protection Insurance protects you and your family if you are unable to work due to illness or injury.
The Bottom Line
Whether you have a family or not, Income Protection Insurance can give you peace of mind that your quality of life is protected. Depending on the policy you choose, you can retain up to 60% of your income if you are ever unable to work due to illness or injury. This recurring payout can last until you return to work, retire, or for the entire term of the policy. If you return to work, you can make multiple claims within the term of the policy if you ever need to. The potential consequences of not having Income Protection Insurance or Critical Illness Cover could be devastating. You could lose your home and be unable to afford a decent quality of life. If you are one of our mortgage customers, we have a legal duty to ensure you understand the importance of insuring your loan adequately. However, whether you are a mortgage customer of ours or not, you’re still welcome to take advantage of our FREE Insurance Service.
At Michael Usher Mortgage Services, we’ve been helping people with insurance for over 30 years. Our friendly insurance experts will help you find the right policy for your situation and arrange it for you free of charge. We understand the potentially devastating consequences of not having Income Protection Insurance, which is why we do all we can to protect our customers and their families.
Please book your FREE insurance consultation with one of our advisors to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
Book your FREE insurance consultation here
Think carefully before securing any other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage.
