Income Replacement Insurance

Income protection insurance¬†or permanent health insurance aims to give you an income if you can’t work in the event of sickness or illness.

This can be anything up to three-quarters of your normal wage, less any state benefits you get.

For the self-employed, insurers usually base the level of cover on your taxable income at the point of a claim.

All pay-outs for income protection insurance are tax free and usually continue until you recover or you reach your selected pension age / term of the policy.

Permanent health insurance, also known as income protection insurance and income replacement, provides a tax free income if the policy holder becomes unable to work through illness. An income is paid until retirement age , the end of the policy term or until the policy holder is able to return to work.

Permanent health insurance does not normally cover unemployment / redundancy.

There is a period following the accident or illness which must elapse before the policy begins to pay. This can range from a month up to two years and is known as the deferment period.

Most income protection policies will give a stream of monthly tax-free payments equivalent to between 50% and 65% of gross salary, although some companies will offer up to 75%.

Premiums are dependent on the monthly income required, age, current state of health smoker status and occupation. The deferment period also affects the premium, with a shorter period resulting in higher premiums being required.

Income protection plans that have no investment link have no cash in value at any time and will cease at the end of the term. If you stop paying your premiums your cover may end.

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