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Options For Income Protection in the UK

Sep 12, 2008
There is two different options for income protection in the UK to safeguard against the possibility that you might lose your income. You are able to take out income payment protection and income protection insurance. While both have similar names they are different policies.

Income payment protection pays out over the short term and income protection insurance would payout up to retirement age if you needed it.

Income payment protection would payout from between days 30 and 90 depending on the provider. It would then provide you with your tax-free income by either giving you 12 monthly payments or 24 monthly repayments again as set out in the conditions of the insurance. After this period of time it would then cease as it is assumed that you would have found work or would have had time to make a full recovery and get back earning a living.

Income protection insurance would payout after a longer period of deferment and it would continue to payout for a much longer period of time. However the downside is that it would not payout for unemployment, it would however pay if you were to become unable to work after suffering an accident or an illness.

As you rely on your income each month for all of your essential outgoings protecting it makes a great deal of sense. Without income protection in the UK to rely on if you did lose your income you might need to seriously change your current lifestyle with the hope that if you adapt it you might be able to pay your outgoings. One of the most important of which is your mortgage. If you fall behind on the repayments of the mortgage you need to make an agreement with the lender to catch up on them along with being able to pay the mortgage at the same time. Without a reliable income coming in each month this would be next to impossible.

Along with your mortgage you would also need to continue to meet any loan/credit card repayments that you have to make each month. Falling into arrears with loan/credit card repayments would have consequences that have to be faced. These would depend on the type of loan and the amount you owe. A secured loan would mean that you would be facing the lender seeking repossession and an unsecured could mean the lender taking you to court and you could have to give up your possessions as a way of paying back some of what you owe.

At the same time you would keep food on the table, the home lit and warm and not have to juggle around bills or make changes to your lifestyle in order to keep your head above water. You would be able to relax knowing that you had a replacement income and this allows you to search for work or concentrate on making a recovery and earning your own income again. Of course you need to ensure that a policy is suitable by checking the exclusions as there are some to be found in all types of income protection in the UK.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of income protection UK .
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