Top income protection insurance myths debunked

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We like debunking insurance myths, and let’s face it, we’ve had a lot of practice over the years, convincing would-be policyholders that most of the tittle tattle they read or hear is just that; piffle.

Having said that it’s often difficult to right wrongs and alter people’s deep-seated beliefs after a while, but we make a habit of persevering on this front in a bid to deliver the truth and nothing but the truth with unsolicited regard to a cornucopia of insurance matters of public interest.

We simply cannot abide people not being in possession of ALL the relevant facts, while we do our very best to break down lies and untruths. It’s all part of the service really.

Below we debunk a host of common income protection insurance myths and misconceptions…

‘I’ve heard income protection insurance doesn’t pay out’ 

Well you’ve obviously being pressing your ear up against the wrong door, because as recently as 2013 the Association of British Insurers (ABI) confirmed that some 91% of claimants successfully received recompense by their insurers.

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But if you don’t want to take their word for it, why not instead refer to the website of the income protection insurance-providing company you’re interested in taking out a policy with; as nowadays most furnish the reader/would-be insured party with pay-out rate stats. The only real time that you might not be able to extract claims monies from your insurer is if you failed to disclose something which could later

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harm your defence. For example: neglect to mention something like a previous medical condition, or falling behind on/missing monthly premium payments.

‘Isn’t income protection insurance just a waste of money?’ 

Admittedly some people get a bit complacent about their health and general wellbeing (which although being admirable is also a bit ostrich-like as any one of us could suffer from a major illness or, unfortunately, be involved in a serious accident sometime).

While not necessarily believing that we’re immortal, there’s this general consensus that ‘it won’t happen to us’. Or ‘it only happens to other people’. Fate tells us otherwise, so with that very much in mind we all need to take measures to safeguard the important things in life, and that includes our main source of income.

Just imagine if for whatever reason you suddenly became unable to work due to suffering the onset of a work-compromising illness or sustained an equally debilitating injury? The monthly instalments offered by an income protection policy would be the difference between financially floating or sinking. Despite it representing a percentage – normally between 50% and 75% of your regular salary – rather than the full hit, this would go a significant way towards mortgage and loan repayments, the paying of domestic utility bills and food shopping.

‘Ok. It might not be a waste of money, accepted, but isn’t income protection insurance really expensive?’ 

Naturally if your normal occupation was a stunt driver and you had a 50 a day smoking habit then the chances are your income protection insurance premiums would reflect the calculated risk that your job/lifestyle choices posed; and be pretty lofty in accordance with the possibility you would be registering a claim in the foreseeable future.

Yet for the normal working man and woman, the cost of income protection policies can be as little as the equivalent of a couple of quid a week. Figure into this a longer deferral period (the passage of time between a policyholder making a claim and receiving their first pay-out) and this amount could be decreased still further. The rates are dependent (as with most insurance products) on everything from the proposed party’s age and occupation to their general health and medical history.

‘I am entitled to benefits from my employers if I’m sick or injured for long periods, so don’t see the point of having an income protection policy’ 

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That you may be, however statutory company sick pay and additional government-bankrolled benefits don’t really amount to that much at the end of the day. Not if you have a sizeable mortgage and loans to repay, both of which might prove challenging/virtually impossible without the financial safety net offered by an income protection plan.

Whilst statutory company sick pay payments are typically capped in the region of £400 per month, an income protection policy habitually pays-out up to 75% of your earnings.

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A far better way of looking at it would be this: If you were eligible to receive state help should you find yourself unable to work for any period of time, you could survive on this money as a stop-gap until your deferred period income protection policy kicked-in. Remember, the longer you stall this, the lower the premium – thus providing a win-win situation of sorts.

‘I have critical illness cover, so I’m covered thanks’ 

And what if you’re incapacitated and unable to work due to a non-critical illness? What, say, you fell victim to an episode of stress or fell from a height and broke your leg? Neither are justifiably classed as critical illness, so you’d still find yourself seriously out of pocket whilst you’re laid up convalescing. Purchasing income protection alongside critical illness cover makes more sense, that way preparing yourself (and the family coffers) for every eventuality rather than just hoping for the worst to befall you.

‘Isn’t income protection insurance basically the same as PPI anyway?’ 

Although the acronyms are quite similar, IPI and PPI are two entirely different policies representing two seismically different things. If you’ve got a particular loan repayment schedule to meet, then PPI will insure the risk of not being able to make repayments on this, yet income protection is far less specific and is there to safeguard a more than useful proportion of your predominant income source.

OK, PPI might, arguably, be able to step in and contribute towards mortgage repayments should ill health strike you down, but then what of the other expenses indicative of most people’s lives? Food, utility bills, fuel, clothes, etc..? PPI won’t cover these areas, that’s for sure, whereas income protection will. 

‘Someone said the application process was long and drawn-out’ 

Not unless you insist on still using snail mail or persevere with an internet dial-up facility. Here in 2015 – and thanks to the advent of user-friendly and easily-navigable websites, income protection insurance policy providers have made it smoother and more efficient than ever before to search, compare and ultimately, arrange a variety of plans suitable for individual needs. So now this one-time accepted excuse holds no sway.

‘I’m self-employed, so there’s no point in wasting my time enquiring about income protection insurance is there’ 

Wrong. In spite of beliefs to the contrary, self-employed proposers can readily and successfully purchase income protection plans these days, so long as they can present the relevant documentation to ease the application process.

Given the often unpredictable nature of their employment status, those who are their own bosses typically look to income protection insurance more and more, to provide for the proverbial rainy day which can hit them more regularly than their employed counterparts.

For more information regarding income protection, read our special Buying Guide and FAQs.

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