The lowdown on income protection insurance

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Income protection insurance is a policy that provides regular money if you are unable to work through an accident of illness. Some policies will also pay out if you are made redundant.

Losing your income if you are unable to work can be devastating to you and your family. State benefits are available, but they pay very little and will probably not cover all your mortgage repayments. For most families, their largest debt is the mortgage, and if you fall into mortgage repayment arrears, you risk losing your home.

What is income protection insurance?

Income protection insurance is a way to protect your mortgage payments and other household bills if your income stops. It provides the peace of mind in knowing that if you fall ill or injured, this will not lead to financial worries.

How long do payments last?

Payments from many income protection insurance policies continue until you return to work. If you have a long-term disability that prevents you from working, payments will be made until your retirement age.

You can take out a short-term income protection policy that covers you for a fixed maximum period of between one and five years. These policies will be cheaper to buy than long-term ones.

In addition to cover for accident and sickness, you can take out a policy that also covers unemployment.

What can payments be used for?

Income protection is very different from payment protection insurance (or PPI) that was often mis-sold by some financial institutions. PPI covered just one debt such as credit card payments or a bank loan. Income protection provides a regular lump sum that you are free to spend as you like.

How much is paid?

Income protection pays a percentage of your regular earnings: normally 50% to 70%, but payments are tax free.

Do you need income protection?

Some firms will financially support their employees when they are off sick, but research by Personnel Today found that only 12% of employers provide support to sick workers.

Before purchasing income protection insurance, you should check whether your firm provides any sickness benefits. Some companies provide generous redundancy settlements, in which case you may not need a policy that covers redundancy.

Since state benefits are low, everyone should take out income protection insurance, especially if they have a mortgage.

How much does it cost?

Policy costs vary widely depending on the type of cover, your age, your job and whether or not you smoke. An insurance broker can provide you with a range of cost options.

Where to buy income protection insurance

The best way to purchase income protection insurance is through an insurance broker. At Ascot Mortgages, we are experts at matching their clients to the right policy for their particular circumstances. We have access to all the leading insurance companies and can find competitive quotes that are not always available on price comparison sites.

Contact Ascot Mortgages today to discuss your insurance requirements. We can provide an insurance quote in a matter of minutes.

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