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B-Advised Blog

Life is unpredictable at the moment – is Income Protection Insurance worth it?


With the uncertainty caused by the Covid-19 pandemic, more customers are pondering the burning question of how long they could last if their income was to stop or if they were forced to rely on savings. 44% of people would struggle with a loss of income within six months. Are you one of these people?

Income Protection Insurance (IPI) is becoming increasingly popular during these unprecedented times, with £202 million paid by insurers in 2020 to assist families who had been dramatically affected by the pandemic.

This form of insurance pays you a regular income if you are unable to work due to an illness or disability and can provide you and your family peace of mind and a financial safety net. But is it the right health insurance for you? Find out more below.

What exactly is Income Protection Insurance (IPI)?

IPI provides regular payments that replace part of your income (usually 50-65%) in the event that you become ill or have an accident that prevents you from working for a time.

IPI is paid out until one of the following occurs; you are fit and able to start working again, you retire, die or reach the end of the policy.

It’s important to note that Income Protection Insurance is different from Critical Illness Insurance, which typically pays out a one-off lump sum for a specific serious illness. However, if you already have Critical Illness Insurance and Life Insurance, IPI could fill in the gaps that the other two don’t cover.

Wooden blocks being turned by hand. Written on the blocks is 'health' and 'wealth', representing health insurance.

What are the benefits of Income Protection?

It is often the case that customers can’t see the value of IPI due to having the notion that they can rely on the state or savings, or making the risky assumption that the need will never arise, whether that is due to the individual being in good health or presuming they are too young to make a claim.

In reality, the average age of income protection claimants is lower than you would think, at around 41 years of age. Statutory Sick Pay (SSP) is often not enough and has strict deadlines, resulting in many people feeling anxious and apprehensive about the possibility that they may become ill or injured without any financial back-ups.

IPI can be a worthy investment if you are self-employed and don’t have the luxury of taking sick leave. Also, if your medical condition is musculoskeletal (which makes up a large percentage of claims), some providers can help to cover the costs for rehabilitation programs or medical equipment to assist you in your recovery.

Stress, anxiety and other mental health illnesses can result in many people needing to take time off work, and worrying about finances is only going to pile on the pressure. With the current pandemic putting both a mental and financial strain on many households, there has been a significant rise in mental health claims, up from 10% to 12% in 2020. IPI can relieve some of the pressure and help you focus on your own recovery and self-care, without having to worry about day-to-day expenses.

Are there any drawbacks?

There is a waiting period before the policy kicks in (usually lasting between 30-90 days) which can mean that you have to rely on sick pay or digging into your savings. There are also certain policy exclusions and reasons that you may not qualify for this type of insurance, including if you are on a seasonal contract and the likelihood of you losing your job is high, if you have been involved in illegal activities, or you have a history of substance abuse.

Additionally, if you are on a low income then the amount you will be able to claim will be significantly lower, as Income Protection Insurance often only covers 50% of your salary.

As with any financial product, Income Protection Insurance should be carefully considered before investing in a policy. You should assess exactly what losing your income due to ill health would mean for your unique circumstances and obligations.

The B-Advised team are on-hand to help you make an informed decision. Offering independent advice with access to the whole market, we can make sure that you get the right cover. Get in touch with our team today.