Lifesearch has five top tips when buying income protection insurance:
1. Don't rely on the state to help
If you are incapacitated and are too ill to work the levels of benefits offered by the government are far too small to maintain the average standard of living and are designed to be only a very basic safety net. You need to have other plans in place, ideally income protection insurance.
2. Don't confuse the covers on offer
In comparison to income protection policies, mortgage payment protection policies, often called accident, sickness and unemployment insurance, can be inferior and may even cost you more. MPPI plans only pay out for one year, include a number of important exclusions and both the premiums and the conditions of the policy can be changed at short notice.
3. Check the occupation class
The occupation class is the most important part of an income protection policy as this is what the insurer uses to decide whether or not to pay your claim. A range of different definitions is available. The most comprehensive is own occupation, followed by suited occupation, and with any occupation being the worst. Own occupation means you can make a claim if you are unable to perform your own job. Any Occupation means that you have to be unable to perform any job, this can include working from home stuffing envelopes, or stacking shelves at the supermarket, equivalent earnings to the job were doing before are not taken into account.
4. Check what other benefits you are entitled to
It is vital to know the other benefits you are entitled to, as these will affect the amount that any insurance policy pays out. Do you know how much the state and how much your employer will pay you, and how long for? The longer you are paid for sickness through your employer the longer the number of weeks before a claim is payable, this reduces the cost of your premiums.
5. Guaranteed rates
Your premiums might seem cheap today but will they stay that way? A guaranteed rate gives you the peace of mind that no matter what happens throughout the term of your policy the price will remain the same, even if you make a claim and return to work, your policy will carry on at the same price as before. If you choose reviewable rates, be aware that even though they start off cheap you have no idea how expensive they could become in the future.
Matt Morris at Lifesearch says, "Peace of mind is a few pounds a week spent on a good income protection policy."