Income protection insurance (IPI) can help you out financially if you are unable to work or looking for a new job, helping you pay the mortgage, household bills etc. if you are unable to work.
Finding the best income protection policy for you can be a complicated process, as it all depends on your current occupation, your earnings, how much cover you may need and your health status.
Policies can therefore differ quite a lot depending on your individual needs, but many of them have the same or similar policy exclusions in place. These determine whether your claim will be paid or not, so are a crucial aspect of your policy and you need to be aware of what exclusions are in place before you sign up for cover. If not, you could risk your policy being invalidated when it comes to making a claim – which could leave you in a financial hole.
Income protection insurance exclusions
- Pre-existing medical conditions. It is important that you declare all medical conditions when you take out the policy, as your insurer will use this to determine your premiums and whether you qualify for cover in the first place. If you fail to reveal any pre-exisiting medical conditions you could risk invalidating your policy
- Pregnancy. Time off work for a normal pregnancy and childbirth is not covered on most income protection policies, although some insurance companies will provide cover for any complications from pregnancy that result in time off work. As always, check the small print of your policy before taking it out.
- Self-inflicted illness/injury, or failure to follow medical advice. Income protection is there to protect you for unforeseen medical events – so if you do not follow medical advice (e.g. take medication) then you may not be able to claim.
- Living outside of the UK. UK-based policies will usually require that you are a permanent resident in the UK, and many policies will require you to be registered with a GP for at least two years. There are specialist international and ex-pat income protection policies available, so be sure to look into that option if it applies to you.
- Mental health. A lot of income protection insurance policies do not offer cover for stress, anxiety or depression.
- Back problems. Similar to mental health issues, a lot of policies simply don’t cover back complaints.
- If you are partly responsible for losing your job. The redundancy part of your cover doesn’t apply if you take voluntary redundancy, and you are also unlikely to get a pay out if you lose your job due to something in your control e.g. your behaviour, time-keeping etc.
- Income protection exclusion period. Most policies have an initial period of time that you can’t make a claim for. This is typically between 90 – 120 days, but can be longer, and is basically the ‘excess’ part of your income protection policy. The longer the exclusion period, the cheaper your premiums will probably be.
Am I eligible for income protection insurance?
You don’t have to be in permanent, long-term employment to be eligible for an income protection policy. Policies can be found for those who work on short-term contracts, seasonal and casual workers and self-employed people. You will need to provide proof of your income in the event of a claim though, so make sure you keep accurate and up to date records.