Income insurance can be any of those three descriptions above. There are two different types of income insurance – the first one is Income Protection insurance (which is also known as Permanent Health Insurance). Income protection insurance allows you to cover a percentage of your salary in the event of a long term sickness from work. You have a “deferred” period which is the length of time you need to have been absent from work before you would begin to receive any insurance payment. It is like having your own sick pay scheme, and is especially important if your employer does not provide you with a salary in the event of a long term sickness.

Some people have arrangements through work which cover them for full pay for six months and half pay for six months. After this period it can become discretionary which means if you were still to be absent from work after a year they may stop paying you any money. Income protection insurance could cover you for this scenario as it allows you to specify how long you want the deferred period to be. As you would expect, the shorter the deferred period you apply for, the more expensive the insurance becomes, as there is a higher probability of the policy being claimed on if your deferred period is only a few weeks.

Income protection insurance can pay out for a set period (for example 2 years), which again makes the policy cheaper or it can cover you right through to retirement age. This means if you were unable to return to work (and met the definitions of incapacity offered by the insurance company) then you would receive your insured amount right through to your retirement age.

Accident, Sickness and Unemployment benefit is completely different. This is a short term insurance policy that pays out for a set period of time (usually 12 months, although you can get cover for up to 24 months), there is a deferred period similar to that of an income protection policy, however, the benefit is usually based on your mortgage payment (which is why it is often known as a mortgage payment protection insurance – MPPI). Please note we do not offer advice on accident, sickness or unemployment cover (ASU) or mortgage payment protection insurance (MPPI)

So is income insurance the same as critical illness cover?

This is a good question and there can be similarities between the two (especially when you might be off work for a lengthy period after suffering a heart attack), but the main differences we can highlight are as follows:

• A critical illness policy will pay out a specified lump sum, an income protection policy will pay out a percentage of your salary (possibly until retirement age if you were unable to return to work)
• Some definitions of illness are not covered under critical illness but do keep people away from work for many months and sometimes years. The types of illnesses would be stress, anxiety or depression. Also bad backs can cause people enormous amounts of pain which can keep them away from work but would not be considered a critical illness. An income protection policy may cover people for these conditions and pay a monthly sum (in the same way as you would receive a salary) until you returned to work.

Does this mean if I have an income protection policy and I have a claim, that I never need to return to work?

Put bluntly No! The income insurance policy is designed so that you would never receive the same amount of income as you would if you were at work full time. This ensures that there is an incentive to return to work. Also some insurance companies offer a rehabilitation service which aims to help you back to work gradually. This is why we believe it is so important to get Independent Financial Advice when considering income insurance.

So what now?

Easy, complete the short enquiry form below and we will contact you to discuss your requirements. Alternatively call us on 01274 516900 where an adviser will be more than happy to discuss your concerns.