Insurance & Income Protection

You probably aren't expecting to be off work sick for longer than a couple of days, but life can be full of surprises. Making preparations for being off work for several months due to sickness or injury could prevent some serious financial problems later down the line.

Income Protection Insurance policies pay out a percentage of your earnings each month if you are unable to work for a prolonged period. Usually, these policies around 60-70% of your salary, but the payments will be tax-free.

There are lots of different options when it comes to Income Protection Plans. It is vital to make sure to check the features of any plan you consider. Some policies have the following features:

  • • Deferred periods ranging from 4 weeks to 6 months
  • • Index-linked benefits
  • • Stepped benefits
  • • Waiver of premium

One issue that some people face is 'over insurance'. Over insurance occurs when certain government benefits or other insurance plans are not taken into account when setting up the policy. When making a claim, the insurer will often only pay a portion of the benefit to prevent the policyholder receiving more than 70% of their earnings.

Income Protection Plans protect your income from illness to recovery. If you never recover from your condition, most plans will continue paying out until retirement. There are lower-cost products available for those who want a degree of protection but do not want to pay the premium of a full Income Protection Plan. Some of these alternative policies only payout for 1-2 years or only cover you under certain circumstances.

At Lifetime IFA, we provide independent advice on Income Protection Plans and other similar alternatives. We take into account state benefits and the tax implications of any policy to ensure that our clients only pay for benefits that they can claim.

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