Income Protection Insurance provides cover against accident, sickness or involuntary unemployment which stops you from working. The cover pays out a monthly benefit usually for up to a maximum period of 12 months, although some income protection insurance covers will provide a longer maximum benefit period.
Premiums are usually charged at a rate of as little as £5 a month for every £100 pound of monthly benefit purchased. The premium rate is not affected by employment type, age or health but you will need to complete a short proposal form and income protection insurance cover is usually subject to acceptance by the underwriter.
There is usually a maximum benefit limit which may be £1,000 and you will not usually be allowed to insure your whole income but normally up to a maximum half of your income.
Make sure you check benefits provided by your current employer, as they may provide a package that includes continued payment of wages for several months of sickness or in case of permanent disability.
Cover under income protection insurance policies is for involuntary unemployment. Taking voluntary redundancy would not be a valid claim.
For the self employed the income protection insurance cover is subject to certain additional restrictions before unemployment can be claimed. The normal requirement is that the business has totally ceased trading and the cover would not provide benefit just because the business is experiencing a quiet period or temporary slump.
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