Support for when benefits aren't enough

The welfare system is under review, and it might be worth looking at income protection insurance. Chiara Cavaglieri reports

Radical changes to benefits come into play on Monday after the biggest shake-up to the welfare system in decades. With various tweaks and a new benefit cap which could hit households with a loss of £93 a week, it's more important than ever that individuals take steps to support themselves – and for the working population, that means income protection.

The controversy surrounding payment protection insurance (PPI) has made many people wary of all protection policies in the market, but income protection (IP) is an entirely different product and one that all employees should consider taking out.

There is a widespread lack of awareness about how IP works, but it actually does what it says on the tin – it covers a person's income should they be unable to work due to illness or injury. As well as being refreshingly straightforward, many providers pay more than 90 per cent of claims so it could be a welcome and reliable safety net.

"With further cuts being made to benefits it is clear that state support in the event of long-term incapacity or ill-health is not guaranteed and it is increasingly up to each individual to take responsibility for their own financial situation," said Karen Barrett at the advice website

"Income protection is designed to provide an income should you be unable to work and ensures that you will still be able to pay for the mortgage and the everyday essentials should something happen to you."

Being out of work and unable to cover bills and the cost of living is potentially disastrous; legally, employers are entitled to statutory sick pay for up to 28 weeks, but after this you must depend on state benefits. Constant changes to the benefits system make it almost impossible for individuals to rely on the state. If you're lucky, your employer may have group income protection in place, so check the sick pay arrangements in your contract.

There are a few things to watch out for when buying IP, particularly the definition used by the insurer to measure whether you can work. While critical illness cover is determined by a list of conditions – if it's not on the list, you're not covered – IP cover is determined by the insurer's definition of "incapacity". Avoid policies that pay out only if you can't do "any occupation", as you'll have to be completely incapacitated to claim. Cover based on "activities of daily working" can also be very tricky because under these policies you can only claim if you are prevented from carrying out various work-related tasks, such as walking and communicating.

Kevin Carr at Protection Review said: "The one you want to look for is 'own occupation' which means you cannot do your own job, the one you're trained for. It will pay you a tax-free monthly income until you are well enough to return to work, or you retire."

An IP policy typically replaces between 50 and 70 per cent of your salary. You will usually have to wait for a specified period before you can claim – anything from four weeks to two years – but it makes sense to arrange for the policy to kick only after you have benefited from any employer and statutory sick pay, because the longer the deferral period, the lower your premiums.

Ray Black, the founder of, said: "Beware the very cheapest policies which instead of offering long-term cover may only pay out for a defined and usually quite short period, sometimes for only a year. If you have a serious long-term illness or condition this type of policy probably won't provide the cover you need."

You can buy IP directly from an insurance company, or through an independent financial adviser who may be better equipped to find the right policy. Various factors affect the premium, including your age, your health and the riskiness of your job.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Life and Style
A teenager boy wakes up.
Life and Style
Researchers have said it could take only two questions to identify a problem with alcohol
food + drink
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Life and Style
Arts and Entertainment
A still from Duncan Campbell's hour-long film 'It for Others'
Turner Prize 2014
Life and Style
food + drink
Arts and Entertainment
Tony Hadley in a scene from ‘Soul Boys Of The Western World’
musicSpandau Ballet are back together - on stage and screen
Arts and Entertainment
From left to right: Ed Stoppard as Brian Epstein, Sheridan Smith as Cilla Black and Elliott Cowan as George Martin in 'Cilla'
tvCilla review: A poignant ending to mini-series
Life and Style
Bearing up: Sebastian Flyte with his teddy Aloysius in Brideshead Revisited
lifePhilippa Perry explains why a third of students take a bear to uni
Arts and Entertainment
Sir Alan Sugar appearing in a shot from Apprentice which was used in a Cassette Boy mashup
artsA judge will rule if pieces are funny enough to be classed as parodies
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

    £300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

    Day In a Page

    Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

    Isis an hour away from Baghdad -

    and with no sign of Iraq army being able to make a successful counter-attack
    Turner Prize 2014 is frustratingly timid

    Turner Prize 2014 is frustratingly timid

    The exhibition nods to rich and potentially brilliant ideas, but steps back
    Last chance to see: Half the world’s animals have disappeared over the last 40 years

    Last chance to see...

    The Earth’s animal wildlife population has halved in 40 years
    So here's why teenagers are always grumpy - and it's not what you think

    Truth behind teens' grumpiness

    Early school hours mess with their biological clocks
    Why can no one stop hackers putting celebrities' private photos online?

    Hacked photos: the third wave

    Why can no one stop hackers putting celebrities' private photos online?
    Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

    Homegrown ballerina is on the rise

    Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
    Education, eduction, education? Our growing fascination with what really goes on in school

    Education, education, education

    TV documentaries filmed in classrooms are now a genre in their own right
    It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

    It’s perfectly reasonable to negotiate with villains like Isis

    So why don’t we do it and save some lives?
    This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

    Is a sub-2-hour race now within sight?

    Dennis Kimetto breaks marathon record
    We shall not be moved, say Stratford's single parents fighting eviction

    Inside the E15 'occupation'

    We shall not be moved, say Stratford single parents
    Air strikes alone will fail to stop Isis

    Air strikes alone will fail to stop Isis

    Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
    Witches: A history of misogyny

    Witches: A history of misogyny

    The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
    Shona Rhimes interview: Meet the most powerful woman in US television

    Meet the most powerful woman in US television

    Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
    'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

    Endangered communities photographed 'like Kate Moss'

    Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style