The coronavirus crisis has put income protection in the spotlight.
So how has it been performing?
It is a type of policy that pays out if you’re unable to work because of injury or illness and has been described as “the best insurance you’ve probably never heard of”.
That is because – when quizzed by consumer champion Which? – just nine per cent of people said they had some form of income protection, compared with 41 per cent who had life insurance and 16 per cent with private health insurance.
Just as coronavirus has been enormously challenging for all of us, the income protection sector has been no different.
There are more than 20 insurers providing income protection, including Aegon, AIG, Aviva, British Friendly, Exeter, Holloway, Legal & General, LV, Vitality, Royal London, Shepherd’s Friendly and Zurich.
Thisismoney, quoting Cavendish Online, states: “Income protection policies will typically pay out for any illness or injury that means you need to take time off work. So, if you were to develop coronavirus and became too ill to work, your income protection policy should pay out your monthly benefit as normal.
“It’s important to know that income protection policies come with a deferred period, which is the point at which you start receiving monthly payments from your policy.
“If you buy an income protection policy with a long-deferred period, say three months, and then catch coronavirus, you may actually recover before the end of that three-month period, and therefore not receive a benefit payment from your policy.”
And it cautions: “While it is not too late to buy insurance, it’s worth knowing that some income protection insurers are starting to add explicit coronavirus exclusions for new customers, meaning that these new policies wouldn’t cover the virus.”
Laying out its position, LV said: “As most people, who contract Covid-19, will only suffer symptoms for a week or two it’s unlikely we’d pay a claim for these people.
“If someone has an underlying medical condition it could take them longer to get better. In these cases, we’ll look at any claim and assess each person’s individual circumstances and waiting period.”
The Association of British Insurers promised: “Protection insurers recognise that there will be many who will need additional support in the current circumstances and will continue to prioritise claims from vulnerable customers. Firms will be flexible in their approaches to supporting these customers, especially if they are experiencing financial hardship.”
Encouraging that the industry generally does seem to be fronting up to its responsibilities.
The Exeter maintains: “It’s tempting to think that if you become too ill to work you can just rely on the state for financial support. However, any help you receive will be minimal. If you’re employed, you may have an employer sick pay arrangement for a period of time. After that, you’re entitled to Statutory Sick Pay of £95.85 per week for up to 28 weeks. If you’re self-employed the picture is even worse.
“Almost 60 per cent of sickness absence in the UK Is due to illnesses such as coughs and colds, mental health or musculoskeletal problems – conditions not covered by critical illness policies.”
The vast majority of workers should be able to get cover whatever their occupation. However, those with very manual or risky jobs could struggle. And there will be complete exclusions like professional sports persons and soldiers.
Don’t forget that you do not have to have a mortgage to look at income protection. You could be renting but still have the same, if not more, outgoings.
Which? recommends every adult of working age should consider taking out income protection.