With the working world on its knees from the devastation of COVID, no one can really say that their job is completely safe, and that is a scary thought.  Supposing that, out of the blue, you no longer had a job.  Could you cope? Would you still be able to pay your bills and put food on the table? This possible situation has worried so many people that there is now a healthy market in income protection policies as a means of bolstering money when income has been removed.

Income protection is being sought by an increasing number of people as careers and jobs that seemed solid and unassailable at the beginning of the year are now looking decidedly shaky.  Many people are now looking to take out a little insurance against the possibility that they will not be able to work in the wake of the continuing COVID carnage, and income protection is ideal for that eventuality.

Basically, income protection insurance is a long-term insurance policy that provides a guaranteed monthly payment if you can’t work because you’re ill or injured. Such a policy typically continues to pay out until you can start working again, or until you retire, die or it gets to the end the end of the agreed policy term. Income protection becomes an ideal safety net in these days of uncertainty, but you need to make sure that any policy that you take out is going to cover all eventualities.  There are some essential aspects to an income protection policy that you need to understand, being:

• It replaces part of your income if you become ill, disabled, or suffer an accident
• It pays out until you can start working again.
• Once you claim, there’s a waiting period before the payments start, so you generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you decide to wait, the lower the monthly payments will be.
• It covers most illnesses that leave you unable to work, including long-term conditions.
• You can claim as many times as you need to while the policy is in force.

In terms of COVID, there are two main aspects that could make a policy come into force; if you actually catch COVID itself, thereby making you unfit to work, or you suffer other related medical conditions that have an impact on your ability to work. If you fear one of these situations and choose to take out income protection insurance, you may be presented with a couple of options regarding payments, cover, and premiums. These might be:

• Level cover. If you made a claim, the monthly income would be fixed at the start of your plan and does not change in the future. If your costs go up, you may find that you can buy less with the same cover payments.
• Inflation-linked cover. If you made a claim, the monthly income would go up in line with the Retail Prices Index (RPI).  This may affect your future premiums, as these may increase in line with the cover increasing.

Furthermore, when you take out cover, you usually have the choice of:

• Guaranteed premiums. Your premiums remain the same all the way throughout the term of the plan. If you have chosen inflation-linked cover, your premiums and cover will automatically go up each year in line with RPI.
• Reviewable premiums. With these, the premiums can increase or decrease in with an insurer’s claims history, the insurers profitability, your age and your lifestyle. The premiums will not typically increase or decrease for the first five years of your plan but can increase after that.

If you are currently in work, and would like to protect yourself against either sickness or redundancy, come and chat to us at Grange Mortgages and see how we can help you.