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Income Protection                                              

So why do I need Income Protection?
Dying prematurely or suffering a critical illness are not the only events that can trigger financial hardship. Being unable to work through ill health or injury, for prolonged periods, can lead to loss of earnings and financial disaster. Loss of income not only causes severe financial difficulties, dramatically reducing your standard of living and quality of life, but can ultimately lead to the loss of your home and even the break-up of families.

Did you know?

  • A young person is almost 20 times more likely to need Income Protection than life assurance*.
  • A 35-year old has a 1 in 5 chance of being off work ill for 6 months, a 1 in 8 chance of suffering a critical illness and a 1 in 13 chance of dying before reaching age 60**.
  • Over 1.65 million people are off work at any one time through sickness and disability and will be off work for at least 6 months**.
  • Around 20% of all people who consult their GP are diagnosed as having a long-standing illness. i.e. one which limits their activities in any way. In 1995, 1.2 million people aged between 16 and 64 were alive who had been diagnosed as having such an illness**.

What does an Income Protection policy provide?
Quite simply a tax-free replacement income if you are too ill to work. Under an Income Protection policy, an income is paid to the policyholder in the event of sickness or disability at the end of an initial waiting period (which can be between 4 & 52 weeks depending on your requirements). The benefit is payable until the earlier of expiry of the policy term (usually you retirement age 60 or 65), the policyholder's return to work, or death. The main purpose of the policy, therefore, is to replace income, potentially until retirement. Many policies also provide Rehabilitation Benefits if you need to return to work gradually or Proportionate Benefits if you need to return to a different (lower paid) job.

What amount of cover do I need?
Cover under such policies is always limited to a proportion of the individual's income. You can usually cover between 50-60% of gross income. The rationale being that this amount together with any potential State incapacity benefit equates to an individual's net income (as the benefits are tax free). These limits are imposed because it is important for the policyholder to have an incentive to return to work and not be better off by continuing to claim under the policy. At the very least therefore we would recommend the policy safeguards essential expenditure, such as mortgage repayments, your committed household expenditure and any medical costs, if you have no other cover.

What types of illnesses & injury's are covered?
There is no standard definition of disability. Generally, the policy wording will require policyholders to demonstrate that they are totally unable by reasons of sickness or accident to follow their own occupation, or in some cases, any occupation to which they are suited.

How do I find out more?
Call us now on 0116 2592371 and we can arrange to visit you and conduct a thorough analysis of your Income Protection requirements.

Please click on the following link for our 'Guide to Income Protection Insurance'

*Source: The Office for National Statistics, Department for Work and Pensions 2002
**Source: Financial Services Education for Consumers Limited 1999/03

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