Income protection Updated:
Nobody likes to think about what would happen if they were unexpectedly unable to work, especially if they're the main provider with a family to support. Thankfully, research from the Association of British Insurers (ABI) shows that an increased number of people signed up to income protection policies last year, to secure themselves against exactly that risk.
Let's start by looking at what income protection actually is. Sometimes referred to as permanent health insurance, it's an insurance policy that comes into effect if for certain reasons (stipulated in the policy) you are unable to work. This usually includes illness and injuries, but can sometimes also cover redundancy.
After the policy comes into effect – and after a predetermined deferment period – you will receive a percentage of your previous income (usually between 60 and 80%) to help you cope until you're back on your feet.
The policy provider will also typically offer other benefits to help you get back to work as soon as possible. Some policies will keep you covered for a long time, until you are back in the same kind of job that you were doing before, while others stop paying out as soon as you get any kind of paid work. If you are unable to find work, policies will generally keep paying out until retirement, the end of the policy term or the death of the policy holder, whichever comes first.
So, these policies can be incredibly valuable, and happily, a growing number of people are taking the plunge. ABI's data shows that, for the first time since 2007, the number of individual income protection policies being taken out grew by 2% in 2015 to 1.15m, up from 1.13m in 2014.
The group income protection market (i.e. policies covered by an employer) also grew in 2015, up by 3% from the previous year. This type of income protection has been expanding since 2013, likely due to increased awareness and understanding created by campaigns such as the ABI's 7 Families campaign.
Raluca Boroianu-Omura, head of Protection and Health at ABI, said: "We're very pleased that more people are benefitting from income protection, which provides vital support for people who are unable to work due to illness or injury. Every year, one million workers find that they are unable to work due to ill health, and income protection can act as an essential safety net by paying a replacement income, but also helping people back into the workplace earlier with rehabilitation services. This new data is encouraging, but there is work to be done to improve the take up of income protection so more people can benefit."
Check your employee benefits package to see if you're already covered by group income protection
If you don't have a safety net in place to cover a loss of income, consider taking out individual income protection, and don't forget to compare quotes to find the most suitable policy
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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