Top 8 questions to ask before buying an income protection insurance policy

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September 1, 2015

Ever on hand to help out when it comes to all matters insurance, we have compiled a rapid-fire ‘Top 8 Questions to Ask before Buying an Income Protection Policy’ guide beneath, which should answer the most commonly raised questions. Or at the very least go a long way to.

Of course, if you’re still wanting more information about income protection insurance then you’re spoilt for choice hereabouts, as Bobatoo has a veritable compendium of income protection insurance guides of varying aspects and degrees from which to choose. So there really are NO excuses for not being in receipt of ALL the facts.

Read our income protection insurance buying guidejargon buster and FAQs now for more information.

Here’s our Top 8 Questions to Ask before Buying an Income Protection Policy:

What is income protection insurance?

A relatively easy one for starters. Although not the financial difference between life and death as life insurance is more often billed as, income protection should never be overlooked at the expense of the former, as this amounts to false economising in our book.

There for instances in life when the policyholder is struck down by an unpredicted accident or illness, income protection insurance essentially replaces part of the insured party’s normal income, and continues to pay out until such time as the individual is fit enough to return to their occupational duties, reaches the end of the pre-agreed policy term, acknowledges retirement age or, sadly, dies. Whichever event occurs first in reality.

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Why do I need an income protection insurance policy?

Recent studies confirm that people are 3 times more likely to go off on the long-term sick during their working life than they are to die. Which is good news for close family (if not employers), yet a fact which doesn’t necessarily see them being completely out of the dark. Not in terms of noticing financial losses anyway. Despite this statistic research suggests that only 1 in 10 of private sector workers here in the UK have arranged an appropriate income protection plan to cover this eventuality. According to the Association of British Insurers (ABI) this amounts to a mere 9.4% of the total workforce in this country, or 3.6million people. Factor in further evidence that purports to 1million employees finding themselves unable to work annually due to sustaining a serious injury/being diagnosed with a life-changing illness and you suddenly began to see the bigger picture. And whilst life insurance safeguards the monetary interests of our loved ones in the tragic event of our demises, it doesn’t offer even a single ray of fiscal hope should we instead lose our income stream. And let’s face facts here for a minute, our salaries tend to pay for most things in our lives so if our earning power is seriously compromised due to unforeseen illness or injuries, then we might quickly become unstuck. Plus, irrespective of whether we have children or not, as if injury or illness results you being laid up and incapacitated for long periods then the accumulative bills won’t pay themselves.

Would I be eligible for income protection if I had a pre-existing condition?

It rather depends on the extent of any previous health issues, whether they were deemed hereditary and if there’s a strong likelihood of said illness returning any time in the foreseeable. Like for example mental health issues or cancer. The chances are that some income protection insurance providers would overlook a pre-existing condition – depending on length of time between initial diagnosis and point of application – and offer you cover, however the premiums would almost certainly reflect the purported risk. Plus they would always establish what effect any such conditions had on your ability to carry out your normal duties of employment.

Can you explain the difference between income protection and life insurance to me, please?

The most obvious difference between the two refers to specifically WHAT each pays out for. Whilst life insurance ONLY recompenses the policyholder’s loved ones should they die, income protection stumps up should you, the policyholder fall victim to a serious injury or illness. In addition to this how and when each pay-out is completely different to, with life insurance tending to compensate for the loss in the one, pre-defined hit, compared to income protection which makes a series of continued and regular payments, satisfying its criteria of handing out a pre-defined percentage of the income you received prior to being incapacitated. Typically this pays each month, and continues for as long as your illness or injury means you can’t return to work, or until you’ve reached retirement age. Or the end of the term. Or Passed away.

Can’t I get income protections as part of my benefits package at work?

It’s as well you might, and admittedly it’s sometimes the best way to arrange such a policy; so this is something you may wish to discuss in detail with your employer.

Are there any circumstances where it wouldn’t make sense to get income protection insurance?


As it happens, yes, although these scenarios aren’t that commonplace and we’d always recommend income protection as a back-up to any other provision which you might have in place regardless. Such instances would be if you/your partner/family believed that you had enough savings to live on during any protracted and undefined period of inactivity/absence from employment, which as it sounds could end up being a complete guesstimate and therefore could potentially leave you out of pocket.

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Similarly relying on company sick pay is an equally risky business, unless you are fortunate to possess a package which entitles you to a rolling income for 12 months or more; but even then there’s no guarantee that you’ll be fit to resume your normal occupational duties within this often rigid timeframe. Elsewhere and government benefits may help your financial cause, but they alone won’t cover all your outgoings, whilst the possibility of retiring early should you be approaching that age at the point of being incapacitated could be a temptation, but only if you thought you could realistically afford not to work again.

I’m self-employed, is income protection right for my employment status?

Income protection is especially important for those who are categorised as self-employed or freelance as unlike your fully-employed counterparts who have the safety net of sick pay should they fall ill, those solely responsible for their own financial ends have nothing to fall back on in this case.

How much is income protection insurance likely to cost me?

This depends largely on both the policy you opt for and your personal set of circumstances. The good thing is that income protection insurance policies habitually extend to safeguard a diverse spectrum of illnesses and unforeseen situations which may present themselves at any given juncture in your working life, while systematically recompensing the policyholder for a sustained passage of time, providing all qualifying criteria is met in accordance with the insurance provider. The predominant factors which influence just how much insured parties can expect to fork out typically include; age, whether or not the proposer is a smoker, their current state of health, normal occupation and the proportion of income you’d wish the policy to cover. All these separate items are taken into consideration before an income protection insurance provider calculates a specific premium.

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