Sick Pay Insurance
No one wants money worries on top of suffering an illness or injury. Sick Pay Insurance (also referred to as Income Protection) is designed to pay you a regular income if you can’t do your job because of illness or injury.
We will search a range of providers from the whole of the insurance market to find a suitable policy to meet your needs and budget. The policies will vary 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. When you are fit enough to return to work the policy would stop paying you the income.
Your sick pay policy explained
Your policy will include a ‘Deferred Period.’ This refers to how long you have to wait before you start receiving the payment. It’s usually set up for four, eight, 13, 26 or 52 weeks.
The deferred period 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 three months, for example, would not need a deferred period of less than 13 weeks. However, if you are self-employed and have limited savings, you might wish to start receiving some money once you have been absent for four weeks.
The Term of the Policy
You can choose the length of time the payments should continue. It might be suitable to match it to your mortgage or continue to pay an income until you reach retirement or a specified age.
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 the 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. Remember, £1000 today won’t buy you the same things it will in 10 years time!
The cost of your policy depends on what you are comfortable with paying and of course, what you can afford.
Our specialists will go through all of the above policy elements in simple, easy to understand terms as they will have an impact on how much the cover would cost. Also, the actual occupation you do along with your medical/health history will influence the outcome. It can be very flexible though, and we are on-hand to guide you to the correct amount needed.
At no point will income protection insurance have a cash-in value.
Here is an overview of the different types of insurance available:
Level Term 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. Whilst having a mortgage repaid will improve things from a financial perspective, there will still be ongoing costs on a monthly basis with raising a family and running a home. That’s where this type of insurance can be most beneficial.