Choosing the right income protection
Choosing an income protection policy
When you start looking, bear in mind that everybody’s circumstances are different. The kind of things that determine how a policy needs to work are:
- The amount of money you need each month
- The length of time you want your payouts to continue
- The level of premium you can afford
- Whether you’ll receive sick pay and for how long
You’re not tied into an income protection policy in the same way you might be with mortgages and personal loans, but it’s nevertheless important to set up your policy in the way that works best for you.
What are the key elements of an income protection insurance policy?
It’s impossible to be definitive, because insurance policies are designed according to each company’s under-writing criteria. In layperson’s terms that means how they assess the risk they’re taking in order to cover you. Most policies will offer:
Complete cover
There are three basic types:
• ‘Own occupation’ pays out if you have to stop your usual job.
• ‘Suited occupation’ pays out if you can’t do your usual job or another one suited to your experience.
• ‘Any occupation’ pays out if there’s no job you’re fit enough to do.
Flexibility
Choose a policy that allows you to increase or decrease your premiums, change your level of cover and take what’s called a ‘career break’, which allows you to freeze the policy and the premiums for a limited period.
A simple claims procedure
If you get ill or injured and have to stop working you’ll want it to be as easy as possible to claim your benefit.
• Can you do it all online?
• Are you able to speak to someone for help?
• How much paperwork, such as doctors’ certificates, do you have to provide?
Unlimited claims
You have little or no control over how, when and how often you fall ill or get injured. Look for policies that don’t put a limit on the number of claims you can make, either in a year or during the entire term of the policy. No matter how many claims you make, it shouldn’t ever change the way your cover works.
Regulation and financial compensation
Insurance companies are authorised and regulated by the Financial Conduct Authority. They should also be part of the Financial Services Compensation Scheme which means you may be compensated if the company is unable to fulfil its obligations to you.
Extra benefits
Most insurance companies provide free extras as part of the package, often called ‘enhanced benefits’. Eleos policies come with these extras as standard:
• 24/7 access to a remote GP from anywhere in the world;
• Cashback on every purchase you make with some of the biggest brands
Regulatory requirements insist on insurers providing the majority of the details listed above - The extras listed here are optional. Eleos provides them all.
What should you be wary of in an income protection insurance policy?
The insurance industry is very well regulated in order to protect the customer. However, some companies and their agents might have their own ways of doing certain things. Here are a couple of things you might be concerned about:
Cancellation fees
You won’t encounter cancellation fees in any income protection policy.
Additional charges
The majority of companies that arrange insurance will be paid by the insurer for setting up your policy. However, some may charge you an arrangement fee for the trouble instead of or as well as their commission. While it's a legitimate business practice, it's by no means a requirement to getting your income insured.
Insurance companies have a responsibility to be upfront and transparent about their terms and promises, and they're regulated to ensure they deliver on this. Intermediaries that arrange your insurance policies for you, however, are free to offer their services to you in any way they wish to. If an intermediary asks you to sign an agreement, it is your responsibility to check it for clauses that you might disagree with.
While there’s nothing illegitimate about what we’ve drawn your attention to here, it’s one of the reasons why we started Eleos. We believe that customers shouldn't have to keep an eye out for the unexpected. We won’t be surprising you with any of the points we’ve listed.
3 things insurers will tell you to do when applying
Be honest and accurate about your occupation and medical history
This is for your sake. If you’ve told your insurer something that isn’t true, either by accident or on purpose, the insurer might refuse a claim or even cancel your insurance.
Keep your insurer up to date
It’s in your interest to tell your insurer if there are any significant changes in your occupation or earnings because they could affect your cover and what you could claim.
Changes to your health and lifestyle don't have any impact on policies that are medically underwritten before being accepted, but if you keep your insurer informed they might be able to offer assistance you’re otherwise unaware of. Eleos’s discretionary benefit of remote GPs is a good example.
You can review your cover at any time
You're not tied in to any form of financial protection, nor are you required to keep the cover the same for any length of time. Income protection policies are flexible because your circumstances might change at any point.
Income protection insurance policies can be set up in many different ways in order to protect people regardless of their circumstances. Not only are the plans flexible when you set them up, they're flexible throughout, so you’re free to adjust and amend them at any time.
FAQs
Yes, as long as you earn, you can get insurance, whatever your employment status. The evidence you need in order to show your income is different and usually includes documents like certified accounts and self-assessment tax returns.
No, an income protection policy has no cash value. It protects you while the policy is active, but if you cancel it or it comes to an end you won't receive any money.
Yes, you can have as many policies as you like, but the amount you receive from multiple policies can't be higher in total than the percentage of your salary that's covered or the payment cap. Having more than one policy won't increase the payments you receive.
Related resources
Income protection for private tenants
The government is planning changes to the landlord-tenant relationship, but until then how can tenants give themselves greater security?
How to protect my income: a guide
Most of us protect our valuable or precious assets, so doesn't it make sense to protect one of the most important: our income?