Income protection is taken out to make sure that if you can't work because of an accident, illness, or being laid off, you'll still be able to pay your bills.
Getting the right kind of income protection for your situation Once you've been out of work for a certain amount of time, which can be between 31 and 90 days, it would start giving you a tax-free income to replace up to a certain amount of your lost income each month. Once the insurance started paying out, it would keep doing so for between 12 and 24 months, depending on the company. This would make sure you could pay your bills and wouldn't change your life too much.
But, as with all types of payment protection, there are things that could stop you from making a claim, which means that income protection might not be right for you. Some exclusions are the same for all policies, but some are different. For example, you can't get insurance if you're retired, self-employed, only work part time, or have a long-term illness at the time you buy the policy. It's important to read the fine print of a policy because that's where the exclusions are written. Exclusions can mean the difference between being able to make a claim and being stuck with a useless policy.
Exclusions are just one of the many things that make income protection and the other policies in the protection family hard to understand. Hopefully, policies will become easier to understand soon. In 2005, the Citizens Advice made a very strong complaint to the Office of Fair Trading. This led to an investigation by the Financial Services Authority and fines for the wrong selling of payment protection products. The main reason for the bad sales was that the customer wasn't given enough information, and the investigation found that companies needed to make big changes to how they sell. Even though there have been changes, the latest news is that three of the five key areas that needed to be improved haven't changed much at all. This means that payment protection, of which income protection is a part, is still hard to understand.
When comparison tables are put in place by the Financial Services Authority in March 2008, this might change. The tables will ask the consumer a series of questions to help them figure out which policy is best for them. They will also list the policy's exclusions and key facts, as well as how much the coverage will cost. For now, the safest and cheapest way to get income protection is to go to an independent specialist provider. Not only will a specialist save you money on your monthly premiums, but they will also give you the advice you need to make sure a policy is right for your situation.
