Income Protection insurance
Income Protection insurance contracts are designed to pay an income if the life assured is incapacitated and unable to continue in employment for a prolonged period owing to sickness or accident.
The maximum benefit that can normally be provided is approximately 50% to 75% of the insured's earned income less the amount of any state benefit to which they are entitled. The benefit can commence after incapacity of one day, one week, one month, three months, six months or one year. Premiums are generally less expensive for the longer deferred periods. The policy can usually be affected on one of two bases:
Own occupation - The policyholder will be insured under the definitions of their own job specification so in effect will be compensated if they cannot do the job they have been trained or able to do.
Working tasks – The policyholder will be insured if they are unable to carry out a set number of specific pre-determined work related tasks, the definitions of which can be found in the Key Features document provided.
Benefits are normally payable tax free provided the cover is not affected under a group arrangement with an employer.