Income Protection Insurance: What Is It & Cost & Best Options?

Income Protection Insurance
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Most of us would find it difficult paying bills if we suddenly lost our jobs because of an injury or illness. Long-term income protection insurance guarantees a steady paycheck until retirement or reemployment, whichever comes first. Learn about its features, benefits, and any caveats you should know before purchasing.

Income Protection Insurance 

Income protection insurance provides a regular income if you cannot work due to illness or disability, and it continues until you return to a paid job or retire. Permanent health insurance is another term for income protection insurance.

The amount of income you are permitted to claim will not replace the precise amount of money you earned before being forced to quit working. You should anticipate receiving half to two-thirds of your pre-tax earnings from your regular work. This is because some money will be deducted for any state benefits you may be eligible for, and the income from the policy is tax-free.

If you become ill or disabled, you cannot immediately claim income protection assistance. You must generally wait at least four weeks, but payments can begin up to two years after you cease working. You may not need the money immediately because you may be entitled to sick pay from your employer or statutory sick pay for up to 28 weeks after you stop working.

What Is the Purpose of Income Protection Insurance?

  • If you cannot work due to illness or an accident, you will get regular payments that will replace a portion of your income.
  • It pays out until you can return to work—or until you retire, die, or reach the end of the policy term—whichever comes first. Typically, it pays out between 50% and 65% of your income if you cannot work.
  • Most illnesses that render you invalid, either temporarily or permanently (depending on the type of insurance and its definition of incapacity), can be claimed as many times as needed while the policy is in effect.
  • The payments usually don’t start until after an agreed-upon waiting period, or “deferred” period. The most usual waiting periods are four, thirteen, twenty-six weeks and one year. The lower the monthly rates, the longer you wait.
  • It is not the same as critical illness insurance, which pays out a single sum if you are diagnosed with a specific life-threatening ailment.

Best Income Protection Insurance

Because each insurer offers various policy terms and features, comparing multiple quotes is essential to ensuring you get the proper protection for your needs at the best price.

You might undertake this research independently or hire a professional broker.

You may compare quotations from the entire market using professional broker services to get the best income protection to match your needs.

#1. Aviva Income Protection

Aviva Income Protection is a comprehensive income protection plan that offers a monthly income if you cannot work due to illness or injury. The plan includes a variety of characteristics, such as a variable benefit structure, assured insurability, and a return on premium option.

#2. NPA

Since 1921, the company has been in operation. Furthermore, the NPA is a pharmacy sector representative to the government and regulatory authorities with products tailored to the pharmacy industry. There are terms and diminishing coverage options available. Indeed, mortgages, critical illnesses, and basic life insurance are all available.

Legal and general income protection goes beyond simply giving your clients a monthly benefit. It can also aid in maintaining excellent health and well-being, allowing people to get back on their feet.

The coverage is for customers who want to protect against loss of income if they can’t work due to illness or accident while covered.

#4. Prudential Income Protection

Prudential Income Protection is a complete income protection plan that pays you a monthly salary if you cannot work due to illness or injury. The plan includes a variety of characteristics, such as a variable benefit structure, assured insurability, and a return on premium option.

Evaluating your specific needs and circumstances is vital while selecting income protection insurance coverage. 

Consider the following factors:

  • The money you earn
  • Your well-being
  • Your line of work
  • The money you have to spend
  • Your retirement strategies

Income Protection Insurance Self-Employed

Self-employed income protection insurance can help you regain part of your lost wages if you cannot work due to illness or injury. With this sort of coverage, you can earn regular payments based on a percentage of your average income.

You have the option of choosing between short-term and long-term income protection.

A short-term policy provides coverage for a defined period. If your claim is approved, you will receive benefits until you can return to work or the coverage expires, whichever comes first.

You’ll continue to receive payments from long-term income protection until you can return to work or reach retirement age.

Meanwhile, when we cannot work due to illness or an accident, we may anticipate that our employers will continue to pay us.

Employees are subsequently transferred to statutory sick pay after six months.

Few firms provide sick leave to their employees for more than a year. Check with your company to see what they will do if you are sick.

Depending on your savings, losing a salary can quickly leave you unable to pay essential home expenses like mortgage/rent and utilities.

It’s especially challenging if you’re self-employed and don’t have sick leave to fall back on. 

Income Protection Insurance Cost 

Your monthly premiums will vary depending on the insurance and your circumstances.

Income protection insurance policies cover various illnesses, events, and situations. As a result, it’s critical to compare what different insurers have to offer.

The following factors have an impact on the cost:

  • Your age
  • Your occupation
  • Whether you smoke or have smoked
  • The proportion of income you’d like to cover the waiting (or ‘delayed’) period until the policy pays out the spectrum of illnesses and injuries covered health 
  • Your present health, weight and family medical history.

The cost will also vary depending on whether you pay:

  • A regular premium, which the insurer may raise over time, or a guaranteed premium, which remains constant for the duration of the policy.
  • Guaranteed premiums may be slightly more expensive in the short term, but many people prefer knowing what they will pay in the future.

Income Protection vs Disability Insurance

Both income protection and disability insurance can assist you if you cannot work due to illness or injury. However, there are a few key differences between the two types of insurance.

Income protection insurance replaces a portion of your income if you cannot work for an extended period. Disability insurance, on the other hand, is intended to provide a lump sum if you become permanently handicapped.

Income protection insurance is usually less expensive than disability insurance. This is because income protection insurance only pays out if you cannot work for an extended period. In contrast, disability insurance pays out whether or not you can work again.

Moreover, income protection insurance is more adaptable than disability insurance. You can specify how much of your income you want income protection insurance to replace. Disability insurance typically provides a defined amount of benefits.

Income protection insurance may be a smart alternative if you are concerned about securing your income if you cannot work. Disability insurance, on the other hand, may be a better option if you are worried about your ability to provide for yourself if you become permanently handicapped.

What Is Income Protection Insurance? 

Income protection is a long-term insurance policy ensuring a steady paycheck until you retire or return to work.

Is Income Continuation Insurance Worth It? 

If something happened to your regular source of income, such as your job, an income continuation plan would detail how your family could maintain its existing standard of living.

Is Income Protection Better Than Life Insurance? 

Income and life insurance are two types of protection products; one protects against an inability to work, while the other provides coverage for death. Income protection and life insurance are two types of protection.

Is Income Protection the Same as Accident Insurance? 

Personal accident insurance provides monthly payments for up to 52 weeks. However, income protection offers continued monthly payments to replace a portion of your lost income if you cannot protect against a covered illness or injury. The payments will continue until you recover, reach a certain age, or the policy term expires.

Is Income Protection Tax Deductible? 


Premiums for income protection insurance are often tax deductible. Here’s what you should know.

How Can I Protect My Income? 

  • Put your money into municipal bonds.
  • Profit from long-term investments.
  • Launch an enterprise.
  • Make the most of your retirement savings.
  • Put money into a health savings account.
  • Apply for a tax refund.

What Is Better, Critical Illness or Income Protection? 

Despite being less well known, income protection policies are more likely to pay out than critical sickness policies since you do not have to develop a specific ailment to qualify for a payout; you only need to be unable to work due to an accident or illness.

What Is a Better Investment Than Life Insurance?

Brokerage accounts, education accounts, and retirement savings plans, such as IRAs and 401(k)s, provide more value and a higher return on investment (ROI) than cash-value life insurance.


Don’t skip payments or cancel necessary insurance because of concerns about price or lack of funds. Instead, you should talk to your insurance about your financial difficulties.

As part of their mission, insurers will inform you of your rights and available assistance if you find yourself in a monetary bind. They can offer you a different repayment plan or modify your coverage better to suit your needs at a lower overall cost. 

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