Income protection: Income protection checklist

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Your occupation, gender and smoking habits will influence income protection premiums

If you're looking for an income protection (IP) policy, here are our top tips to get the best cover for the most competitive premium.

Before you buy income protection

  • Many employers have a group insurance policy that means they can pay your salary if you’re off long-term. It doesn’t appear on your annual P11D statement of taxable benefits in kind, so you’ll need to ask whether you’re covered.
  • Don’t over-insure. If you have two income protection policies, total payouts will be restricted. Some IP policies also deduct state benefits from your payout.

Buying income protection

  • Be aware of the different types of income protection and which is most suitable for you
  • If you’re a smoker, shop around. Some providers, including Cirencester Friendly and Holloway Friendly Society don’t add an extra premium. With most other providers, smokers pay around 50% more than non-smokers.
  • Make sure you reveal all your health issues when applying for a policy. Insurers can turn down a claim if they find out about a health condition you didn't previously flag up, no matter how small it seems. It is always better to disclose too much information than risk a rejected claim further down the line.
  • Make sure you know if the premiums are guaranteed throughout the policy, linked to age or inflation, or reviewable.
  • If possible, choose own-occupation cover, as this will pay out if you're unable to do your own job. Avoid policies that cover 'activities of daily living' (ADL) or 'activities of daily working' (ADW) as these often don't pay out unless you're unable to do basic tasks such as dressing yourself or holding a pencil.
  • Cut the cost. If IP looks too expensive for you, consider reducing the monthly payout, extending your deferred period or looking at full short-term IP.
  • Buy IP and short-term IP (Stip) together. An IP policy with a long deferral period is much cheaper than one with a short deferred period. A Stip policy could be used to bridge the gap.
  • Check for waiver of premium. Most IP providers pay your premiums for you while you’re receiving payment under the policy. Most ASU policies don’t.
  • Check what practical 'back to work' help you might receive in the event of a claim, including counselling and rehabilitation.
  • Take independent advice. Protection insurance can be complicated and receipt of IP benefits can impact on state benefits. An independent expert will be able to find the best cover for you.

After you've bought an income protection policy

  • Ensure you have regular reviews. As your income rises over time, you may want to increase your cover. Some policies include an indexation option.
  • If you switch, don’t cancel until your new policy is in place. Otherwise you could be left without cover.

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