Is income protection right for you?

Posted by / August 9, 2021

Are you considering an income protection policy? For many people, the security and peace of mind it can give represents fantastic value for money. But there are some important matters to consider on getting a policy that helps protect your income. Let’s take a look at the ins and outs to help you answer the question: is income protection right for you?

What is income protection?

Income protection is designed to protect you financially if illness or injury leaves you unable to work and earn an income. Typically, an income protection policy can cover around 60-70% of your gross monthly salary. Then, should you subsequently become incapacitated, you could receive a replacement income until you recover sufficiently to return to work or reach your retirement years.

What do you have already?

Not everyone gets sick pay from their employer. That leaves you to rely on Statutory Sick Pay, which the government provides and amounts to just £96.35 per week for the 2021/2022 tax year*. So ask yourself. Would £96.35 per week be enough to sustain your lifestyle while you are unable to work? If not, then income protection is something you should consider.

Self-employed? Then, unfortunately, you aren’t entitled to claim Statutory Sick Pay. Instead, you must apply for Employment and Support Allowance. That currently amounts to a maximum of £74.70 if you intend on going back to work. The good news is that most income protection providers welcome self-employed individuals as well as standard employees.*

Talk to your employer…

Now, you don’t want to make it sound like you are planning a raid on your company’s savings! But it’s important to know where you stand as an employee in terms of sick pay. Does your company provide it? If so, how much and for how long? Getting your head around the numbers will help you decide whether an income protection policy is right for you. Some employers even provide income protection for their staff as part of their employee benefits package.

Figure out how much you need

By now, it may be beginning to look like an income protection policy is a bright idea. Your next job is to figure out how much you would need to cover yourself financially while you were unable to work. Consider these key questions; How much of my salary will I need to cover? How much do I need each month to ensure my outgoings are covered? Will I need to cover up to 70% of my salary? It’s essential to consider these questions because the less cover you need for your Income Protection plan means, the more you will save on your policy.

Want some help running the numbers? Get some help from our friendly team.

Choosing a deferral period

Still with us? Good.

The next thing to consider is your deferral period. This is simply an agreement between you and the insurer on how long you must be off work before you can make a claim. The longer you are prepared to wait, the cheaper your premium is. Some insurers fix their own deferral period, while others give you the freedom to choose your own.  

We are one of the income protection providers who give you the freedom to choose your own deferral period – and it can be as little as one day for many occupations. That means you can start your claim pretty much as soon as you are signed off work. Find out more about how our policies protect you.

What illnesses/injuries are covered?

Some insurers may refuse to cover any pre-existing illness or recurrent injuries that you are already living with. Others may refuse to cover certain illnesses full stop, whether you’ve already had them or not.

When you are applying for your policy, you must pay attention to this. Do ask whether pre-existing illnesses are automatically excluded as you may choose to go through a medical assessment or questionnaire that could give you more coverage. Whichever route you take, it’s extremely important that you are honest. In the event that you had to make a claim down the line, your insurer may refuse to pay out if they have grounds to believe you misled them about something.

Understand exactly what your policy covers

Diving into the nuances of an insurance policy isn’t the most thrilling way to spend your time. But if you want a policy that you can be confident in, it really is worth taking the time to learn exactly what a policy covers – and what it doesn’t. Make sure you check the policy wording. It’s a document that all insurers must provide and lays out the ins and outs of their cover. If you don’t feel confident doing this, consider seeking independent financial advice and letting a qualified professional guide you.

How much does income protection cover cost?

As you may have guessed by now, the cost of your policy will depend on many factors – including your age, your medical history, level of cover, and the perceived risk of your profession. Let’s say you have diabetes; you’re then more likely going to have a higher premium as this condition, if not carefully managed, will more likely cause you to be ill and for longer than someone without diabetes. 

And when you get cover with PG Mutual, you can get a share of any profits made. As a mutual society, we share our profits with our policyholders, helping them to build a nest egg for their future. Start a quick quote and see how affordable income protection can be with PG Mutual. 

>> Why our mutual status is good news for you!

Income protection vs critical illness cover

It’s important not to confuse income protection with another illness-related insurance called critical illness. As you probably understand now, Income Protection is about providing a replacement income if illness or injury were to prevent you from working for a period of time.

Critical Illness cover doesn’t focus on a person’s capacity; instead, these plans provide a payment or series of payments to support you should suffer a life-threatening or life-changing illness. This cover can be valuable in these circumstances but is not designed to replace future lost earnings.

Check past claims performance

The actual test of any insurance policy comes when you need to make a claim. And some insurers are better are handling claims than others. Between 2016 and 2020, 94% of new claims were covered. We are here to help our members and don’t look for ways to wriggle out of our responsibilities.  

Over to you…!

You can find out more about our cost-effective income protection policies at And if you have any questions about our cover – or income protection in general – we would be happy to help. Just give us a call.



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