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Life Insurance or Income Protection Insurance?

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Whats the difference and which one should I get?

Income protection insurance is designed to offer security for the policy holder to keep paying necessary bills if they become unable to work due to injury or illness in the form of a monthly benefit amount. When considering if you might need income protection insurance, look at your regular monthly bills like: Household expenses, Credit card loans and School fees. If you add all of these up, could you or help from family or friends continue to afford these if you weren’t able to work? On top of this, you could face extra medical bills if you become ill or disabled making the monthly costs even higher. Around 1 million workers find themselves unable to work due to injury or illness every year, according to the ABI. This is why income protection is so important to make sure you and your family are covered. Currently only 1 in 10 families in the UK has any sort of income protection insurance policy. This is more surprising when compared to 23% of households having a medical policy for a pet.

One reason that few families have income protection is due to the policies being quite complex. This is because each policy is tailored to each individual person so that they can get the specific cover for their unique circumstances. The costs for premiums vary a lot and some of the factors that affect these are:

  • Your current health – If you are well and don’t have much of a medical history, you won’t have to pay as much to insure yourself.
  • Your Sex – Women statistically make slightly less claims so men might pay more.
  • Your Job – The riskier your job is, the more you will have to pay.
  • Your Age – If you are older when you take out a policy, the increased risk of getting ill means you are likely to pay more.
  • Hobbies – If you drink or smoke or take part in any dangerous hobbies the cost can be a lot higher.
  • Waiting period – If you can wait for longer before making a claim, this will reduce the cost of the premiums.
  • If you are prepared to do other work – The cost of premiums is reduced if you are prepared to work in other jobs rather than just your own when you become ill or injured.

In comparison, Life Insurance is designed to pay a lump sum of money in the event you either pass away or are diagnosed with a terminal illness. Some income protection policies might pay out a benefit in the event the policyholder dies, but they are not designed to insure your life but instead just your income. Life insurance is almost guaranteed, once you have been paying the premiums for a certain amount of time, you will always get covered when the policyholder passes away. With income protection insurance, you can pay the premiums for just as long but never actually need to make a claim and there is no return on the money payed in if you don’t make a claim.

Whilst there are hybrid products available from some insurers, it is more often than not that it will be cheaper to have separate policies for each if you do want to take out both sorts of insurance. This allows for each policy to be set up to more exacting requirements rather than a policy that covers a much wider range of options. For individuals in certain professions like being a Director or higher risk jobs, both income protection and life insurances have had specific policies designed for them. It would be worth calculating how much you need to cover and getting a quote for income protection insurance from that and doing the same for the life insurance policy. Then you can speak to an advisor about possibly a combined policy and see if it works out cheaper or more expensive.

Whilst some of the insurers we work with at Income Protection Expert might not always be able to offer a combined policy, our advisors can work with you to find you the best possible quote for your unique circumstances and requirements. All of our advisors also work under our ‘no pressure guarantee’ which means that they will never push you to take the policy further than the quote stage if you don’t want to. If you are interested in taking out an income protection plan or even just getting a quote, why not fill out one of our quick enquiry forms which you can find links to on the side of this post? We can then put you in touch with one of our experts and get you started!

 

Chat with an expert now!

Be put in contact with one of the UK’s best income protection advisers

Speak to one of our friendly income protection experts now to find out more independent,
unbiased Income Protection information.

click here to chat with an income protection expert now

Or call us on 01604 805862

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