Since the pandemic outbreak many people are reassessing their finances to see which, if any, of their monthly expenditure can be cut and may be considering cancelling their protection policies, such as income protection. This could be a false economy and leave you unprotected in the future, at a time when you may need to make a claim.
Income protection explained
Income protection policies provide a monthly payment (payable after a waiting period) to help replace your income if you are unable to work because of illness, an accident or sometimes on redundancy, income protection plans do not normally cover redundancy as standard. Short-term income protection policies will pay out for a fixed amount of time (six months or a year), whereas long-term income protection policies are designed to replace your income (up to a maximum of around 60% before tax) until retirement age or for a specified period of time.
Existing policies and COVID-19
Policyholders who took their policies out before the outbreak should be covered under the existing terms and conditions, for both short-term and long-term income protection.
Fortunately, most people who get the virus recover within a few weeks. You would therefore be unlikely to be able to claim under the sickness element of your income protection policy because these types of policy normally have a waiting period before money is paid out. Some plans may also have a minimum claim period, such as 30 days. If you have been furloughed by your employer, and are still receiving most of your income, it is unlikely that you will be able to claim under your policy.
It is normal to have a waiting period for payments under income protection but there are plans available with day one cover.
If you are an existing policyholder who had unemployment cover included in the policy and you are made redundant, you should be able to make a claim for enforced redundancy.
Taking out a new policy
Policies are available for new customers who want accident and sickness cover, although you should be aware that pre-existing medical conditions will be excluded, as is always the case. In addition, insurers may have changed their terms for new customers.
It’s important to note that insurers have stopped offering redundancy cover at the moment on new plans.
Managing existing policies
The good news is that you can renew your short-term and long-term income protection policies, although the terms may change at renewal.
Furthermore, if you are unable to pay your premiums at the moment, some insurers are offering three-month payment breaks.
Here to help
It’s important to remember that all protection cover should be bought for the short, medium and long term and should be tailor made to suit your own circumstances. When it comes to taking out protection cover, don’t just opt for the cheapest premium, it’s important to make sure the policy matches your individual circumstances. This will give you peace of mind, knowing that in the unfortunate event of having to make a claim, you will be covered.
If you need any advice on an existing income protection policy or you are looking to take out a new policy, contact us for expert advice.
Some income protection products may have an investment element. The value of your investments can go down as well as up, so you could get back less than you invested.