Personal Income Protection Plan Advice

Can you replace your income if you fall ill, have an accident or become disable?

Thursday 25 November, 2021

Yes you can, by having a personal income protection plan tailored to your needs. This protection plan will replace your income in the event of either an illness, accident, or sickness. It covers your income for a short or long-term illness where, in most circumstances, you have been prevented from being able to work. Income protection is important as this will cover your commitments, debts and living costs. Income protection enables you to focus on getting well and returning to work without having the financial stress of meeting these commitments. It provides you peace-of-mind in knowing that you can always afford to pay your liabilities, even when you are not in the right place with health, and income has become limited.

Will income protection cover a long-term illness?

On average, people don’t return to work for 7 years if they suffer an illness which restricts them from being able to maintain their lifestyle. Income protection will cover you for that period, providing that your policy is full-term. Alternatively, ‘budget’ policies can pay out for a 1, 2, or 5-year period, giving you short-term stability. These plans tend to be more cost effective, but run the risk of falling short on your potential needs.

Can I get income protection if I’m self-employed?

Yes, various levels of income protection are available to the self-employed.

If you are self-employed, ideally you would like a day 1 deferment period, as this means you can claim from the first day you are ill. A deferment period is also known as a waiting period. Those who are self-employed tend to apply for a 1-day deferment period as they are not eligible for statuary sick pay. Self-employed are generally unable to pay for any financial commitments if their income has been instantly stopped. As they have no employer, there are also, more often than not, no employment benefits that offer quick security.

When deciding whether to have a deferment period, you should assess how much you pay out on bills and your lifestyle monthly. These are fixed costs which need to be prioritised to keep your assets, such as you home. You also need to work out your living costs. These are the costs that enable you to buy petrol, food, and luxury expenses, plus meet your other bills that will continue to be due. Once you have worked out a figure of how much you need per month, you can start to think about which level of income protection would be bespoke to you. This is important, because in the event of a claim you need to know how much income protection benefit the policy will pay out each month.

How much does statuary sick pay provide?

If you are employed you are entitled to statuary sick pay, which is currently £96.35 per week, and paid for up to 28 weeks. This means you may only receive £385.40 per calendar month to pay all your fixed costs as well as your living costs. Statuary sick pay will stop after 28 weeks. This means that if you are unable to work for longer than the 28-week period, you would be left with no income. Also, if statuary sick pay is not enough to pay all your bills and living costs then income protection can provide that extra financial support to enable you to pay for all of this. With income protection you would also be entitled to a maximum percentage of your wages, for example 60%.

Selecting the right income protection policy

When choosing an income protection provider, you want the best possible cover at the most cost-effective price. You need to consider your lifestyle choices as this will affect your premium rates offered. For example, if you’re an active individual with a well-balanced diet, and a good BMI (Body Mass Index) then your premiums should be lower. Other factors that can influence your premium rate include whether you’re a smoker and your age. If you are older and a smoker, your premiums are going to be higher, as you are more likely to fall ill. Your occupation is also considered when calculating your premiums, for example an office worker may have lower premiums than a trades worker, as they are more likely to injure themselves, possibly causing long-term health issues. That said, there are specialist providers who offer cost effective covers for specialist occupations.

Other optional benefits you can receive on the cover include: back to work support, fracture cover, doctor services, prescription services, nutritional services, medical MOTs, physiotherapy, and much more. These services are provided to help assist you with returning to work as soon as possible. Any fracture and its severity can receive anything from £800 to £6000 depending on the policy provider. This is called fracture cover and is paid out regardless of if you are able to work or not. Back to work support will also cover your income if you gradually go back to work and are not receiving the full income previously earned prior to the claim.

The importance of income protection

You are more likely to be off work sick than you are to pass away before retirement. Therefore, income protection has now become one of the most essential insurances to have. You are more likely to get your money’s worth and use this insurance, making it the most beneficial, especially if someone is self-employed and left with no income when off sick.

According to Powell, Devine and Clark (2021), since the pandemic hit in 2020, approximately 11.7 million jobs were furloughed through the Governments job retention scheme, providing those who were self-shielding, or their industry was shut down, with 80% of their wages paid to them each month. The furlough scheme was basically the Government’s own form of income protection for those who couldn’t work to keep the economy going and to prevent job losses.

If a personal income protection plan, that you can tailor to your personal financial lifestyle sounds reassuring to you, then please get in contact with us on 01462 510 400. One of our specialist protection advisors will arrange a no obligation appointment with you. Our team of specialists can recommend your best fit provider and tailor this to your needs at the most cost-effective price. Alternatively, you can email me directly on

Shannon Austin

Protection Adviser in Hitchin, Hertfordshire.

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