Sick Pay

No one wants money worries on top of suffering an illness or injury.  Income protection is designed to pay you a regular income if you can’t do your own job because of illness or injury.

It can be very flexible to meet your individual needs and budget.  It varies slightly between insurers, but as a rule of thumb you can cover up to 55% of your earnings before tax, up to a maximum of around £250,000 a year.

You can decide on the amount to be paid (up to the above limits), when it should start paying out and for how long it should pay you an income for. Obviously when you are fit enough to return to work the policy would stop paying you the income.

Your sick pay policy explained

Deferred Period

The deferred period is basically how long you have to wait before you start receiving the payment.  This can usually be set up for 4, 8, 13, 26 or 52 weeks.

The deferred period really should be based on how long you could manage to make ends meet before you would need financial assistance.  Someone who would receive full pay from an employer for 3 months for example, would not need any income until that 3 months has passed.  However, if you are self-employed and have limited savings, you might wish to start receiving some money once you have been unable to work for 4 weeks.

The Term of the Policy

You can choose how long the payments should continue for.  It might be suitable to match it to your mortgage term or continue to pay an income until you reach retirement or a specified age.

Alternatively you can look at shorter periods of time that any payments would be paid out for.  Many companies offer a 2 year period that they would pay a claim for, after which the benefit would stop.  A good short term fix at a greatly reduced cost.


By adding this option it means that each year the monthly premium will increase, but also the income you receive will increase as well. With most insurers this is in line with Retail Prices Index (RPI).  In practice, by adding this option, if you are unfortunate to have to make a claim, then each year you are unable to work the amount of income you receive from the policy increases.  This is to help to protect the income against inflation.  £1000 today won’t buy you the same things in 10 years time!


How much are you comfortable with paying?

All the above, amount to be paid, deferred period, term and whether indexation is added or not will have an impact on how much the cover would cost. That plus the actual occupation you do along with your medical/health history will influence the final outcome.  It can be very flexible though and we are here to help guide you to the correct amount needed.

At no point, does income protection insurance have a cash-in value.

Types of insurance available

Level Terms Assurance:

Level Term Assurance pays a predetermined lump sum in the event of death during the duration of the policy. Set up for a specific amount at the outset that will remain the same throughout the duration of the policy – hence the name level.

Decreasing Term Assurance:

Decreasing Term Assurance is similar to Level Term Assurance, but the benefit gradually decreases over the term of the policy. These policies are designed as cover for a repayment mortgage, or other loans where the amount of capital outstanding also decreases over time. Because the benefit reduces over time, the premiums are kept very low.

Family Income Benefit:

Family Income Benefit is the hidden gem of insurance that not many people are aware of.  As the name suggests they are most suitable for people who have children.

Instead of paying a lump sum upon death, it will pay a regular monthly tax-free income in the event of death to your dependents up until the end of the term of the policy. We would normally structure it to coincide with your youngest child reaching an age where they should be self-sufficient. 

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