Income Protection
Income protection pays you a monthly amount while illness or injury stops you earning. It answers the likeliest of the serious things: being unable to work for months is far more common than dying or being permanently disabled, and it is the exposure most households have nothing at all against.
Two details decide whether a policy works. How long you have to wait before it starts paying, and how the wording defines being unable to work. Both are settled at application, and neither can be changed once a claim has begun.
Cover
What this typically covers
A monthly benefit
Money every month while you cannot work, in place of the salary that has stopped. The bond arrives monthly, so the replacement should too.
A recurring payment replacing a stated proportion of earnings during a period of incapacity, rather than a lump sum on a single event.
The waiting period
How long you carry yourself before the policy starts. A longer wait makes the cover cheaper, so choose it against what you have: sick leave, savings, and how long the household could hold out. Nothing is paid for that stretch.
The deferred period between the onset of incapacity and the first payment, selected at application and priced accordingly.
How incapacity is defined
The most important sentence in the document. A policy measured against YOUR occupation pays a surgeon who loses the use of a hand. One measured against ANY occupation may not, on the reasoning that the surgeon could do something else. Two policies at the same price can be that far apart.
Assessment against your own occupation, a similar occupation, or any occupation, which is the term that decides whether a claim is admitted.
Temporary and permanent claims
Most claims are temporary. A back operation, a long recovery, a course of treatment. You are paid while it lasts and it stops when you go back, and that is the ordinary use of this policy, not the catastrophic one.
Cover for temporary inability to work as well as permanent incapacity, with the benefit ending on recovery, at retirement age, or at the end of the benefit term.
What the benefit does while you claim
A claim can run for years, and a monthly amount fixed at today's value is worth noticeably less by the end of one. Whether it rises while you are claiming, and whether your cover carries on afterwards, are both wording questions worth asking before you sign.
Escalation of the benefit during a long claim, and the continuation of cover once the claim ends.
The ceiling on what may be insured
You cannot insure your whole salary, and that is deliberate: a policy paying more than working does would be a reason not to go back. It also means the benefit has to be checked against what you earn now.
Insurers limit the benefit to a proportion of earnings, verified at application and again at claim stage.
Limits
What this will not cover
Being out of work is not a claim
This answers for medical incapacity. Retrenchment, a business that fails, and a contract that is not renewed are none of those things, however sudden they feel, and no income protection policy covers them.
The waiting period itself
Nothing is paid for the deferred period on any claim, including the ones that go on for years. It is not an excess that comes back later, and choosing a long one to make the premium comfortable is a decision about the first months of a real claim.
What was not disclosed at application
Occupation, income, medical history and pastimes. Assessment reads the application back, and this class checks earnings at claim as well as health, so a benefit set against income you no longer have is reduced to the income you do.
Restricted terms on some conditions
Mental health and musculoskeletal claims are the two largest categories in this class, and some wordings limit how long they will pay for either. It is a common limitation, not a rare one, and it belongs on your schedule where you can see it.
Claim
When you claim
Notify at the start of the absence, not the end
The waiting period runs from when you stop working, so the claim is opened while you are still inside it. Waiting until it expires before telling anyone delays the first payment by however long the assessment then takes.
The evidence has to speak to your job
A report saying you are unwell is not the same as a report saying you cannot do what your occupation requires. The assessment compares a medical finding against a set of duties, so those duties need describing properly and in detail at the start.
It is reviewed while it pays
A monthly benefit is not settled once. The insurer asks for continued medical evidence, and payment ends when you are able to return. Going back part-time is usually met with a reduced benefit and not the end of the claim, which is worth knowing before you turn down light duties.
Questions
Frequently asked questions
Disability cover pays a lump sum, once, where incapacity is permanent. Income protection pays monthly for as long as you cannot work, including when the answer turns out to be eight months and not forever. Most people need the monthly one first, and most people buy the lump sum first.
Add up your sick leave, your leave, and the savings you would genuinely spend before touching anything else, then choose the period that ends where those run out. Extending it is the cleanest way to bring the premium down, and shortening it is the most expensive comfort in the class.
Group income protection is real cover and it belongs to the job. It replaces a proportion of a salary you stop receiving when you leave, it is often written to a group definition rather than your own occupation, and it ends when the employment does. Treat it as a floor to build on.
Under the current treatment the premium is not deductible and the monthly benefit is not taxed in your hands, which is the reverse of how this class worked before the rules changed and the reason older policies were sized against gross salary. Size a new benefit against take-home pay, and check the basis on your own schedule rather than assuming it, because policies written under the earlier treatment are still in force.
It works, and proof of income is the part to prepare for. Insurers assess earnings at application and again at claim, so a business with variable drawings and a low salary needs the basis agreed at the start, before there is anything to argue about. Get the definition of income written into the schedule.