The world of protection insurance can be an understandably confusing and perhaps overwhelming one for many people who have never previously taken out such insurance - and maybe even a fair few people who have. Income protection insurance, for instance, might seem to overlap a lot with other often-mentioned forms of protection insurance, such as life insurance and critical illness cover.
Unfortunately, this situation has led to various myths springing up around the subject of income protection insurance, that just don’t reflect the reality.
So, let’s take a look at some of them, to help ensure you make only the best choices when you are in the market for such insurance.
”I have sick pay through work, so I don’t need income protection”
It might well be the case that you would be entitled to Statutory Sick Pay (SSP) if you find yourself too ill to work. That depends on satisfying the eligibility requirements, including being classed as an employee, and having already done some work for your employer. At the time of typing, you must also earn an average of at least £120 per week in order to qualify for SSP.
However, it’s also true that the amount paid in SSP - £96.35 per week for up to 28 weeks, as of 2022 - isn’t exactly a huge amount of money for most people. If, then, this is the most to which you would have access as income in the event of being too unwell to work, it is important to consider how you would cope in the worst-case scenario.
Many people ultimately conclude that a well-chosen income protection policy would give them an important additional layer of protection if the worst was to arise.
”I have a critical illness policy already, and that’s basically the same thing”
Alas, it is not the same thing! Yes, there can be some areas of overlap between these two types of protection insurance, in that both can protect the policyholder in the event of them falling ill. And depending on your particular circumstances and policy, it might be the case that having just one of these types of policy - critical illness cover or income protection insurance - will meet your needs.
But regardless of whether this will be the case for you, the fact remains that they are two different types of protection insurance. The two have important differences, with one of the most obvious being that critical illness cover pays out a one-off lump sum, whereas income protection can provide an ongoing income.
Furthermore, critical illness policies typically cover any of a range of specific conditions that may be stated in the given policy - which means if you develop a condition that isn’t listed, you wouldn’t be entitled to any payout. This differs from the situation for income protection, which covers the inability to work, instead of focusing on what illness or accident has caused such an inability.
”I’ll never get a payout from an income protection policy”
The belief that all too many people have, of income protection insurance never paying out, is one sadly mirrored across the protection insurance industry in general. And as we addressed in another recent blog post here at QuoteLifeCover, the refusal rate for those making a claim on a protection insurance policy is actually very low - only about 2%.
So, it would be a shame if you denied yourself protection that you could really benefit from, due to a perception that turns out to be inaccurate.
And don’t forget that when it comes to income protection specifically, it could actually be easier to make a claim than would be the case with life insurance or critical illness cover. With the former option, after all, you would have to die before the policy would pay out to your beneficiaries. And in the case of the latter, you would need to have developed a specific illness listed in the policy terms.
By contrast, if you are an income protection insurance policyholder, simply being rendered unable to work as a consequence of long-term illness or disability will be enough to entitle you to a claim.
Would you appreciate more in-depth advice or guidance in relation to any of the myths above - or indeed, any other worries you might have about income protection cover? If so, our UK advisers are available to chat; just call 0800 316 6917 to take advantage of our no-obligation advice and quotation service.