When can I claim income protection?

Life insurance policies may pay out on claims to policyholders if diagnosed with a terminal illness or to their chosen beneficiaries (or estate if not in a trust) in the event of death. Income protection insurance (IPI) compensates policyholders a certain proportion of their income (usually 60%) if become unable to work due to sickness or injury. This continues until they return to work or retire unless you take out a short term income protection policy.

So, when does income protection pay out? Scroll down, and you’ll find out below.

The do’s and the don’ts that might invalidate your claim

Before we even get to the part of making a claim, it is essential to know what might invalidate the same in the first place. Here are some of the things that the insurer needs to be made aware of before taking out income protection insurance:

Medical history

The insurer must have full details of your and your family’s medical history. Failure to provide or concealing some information can prompt the provider to deny you a payout when you file a claim.

Pre-existing condition

If you have any pre-existing medical condition, you must look for an insurance company that is willing to cover it. Why so? Even though income protection insurers normally cover policyholders against illnesses that might prevent them from working, there’s an exception when it comes to pre-existing conditions like heart disease or cancer. So it’s essential to check with your potential carrier because assuming that your condition is covered may deny you compensation when you fall ill.

Lifestyle

Are you an enthusiast of dangerous hobbies like mountain climbing or skydiving? Or are you a habitual smoker or a heavy drinker? You must reveal this kind of information to the insurer before taking out the policy. Failure to do so might invalidate your claim and deny you a payout.

When should you claim income protection?

Income protection policyholders don’t usually claim a payout immediately – there’s a waiting period, which is variously known as the excess or deferred period. This is the duration (from the time of illness) that you should wait before becoming entitled to a payout. The period usually ranges from four weeks up to one year, and the longer you wait, the lower premiums you’ll pay.

This then begs the question, how do you survive during the waiting period without payment? Below are some of the ways of replacing the income in the meantime:

Savings

If you have saved from your previous salaries, investments, or supplementary incomes, you can leverage them as you wait for the onset of the benefit period. Be sure to spend the savings wisely such that by the time they’ll be nearing depletion, your waiting period shall have ended, and you will start receiving regular income from your insurer.

Employer’s sick pay

Liaise with your employer to check if they offer a benefits package for unforeseen events like illnesses. Please note that an employer’s sick pay is not always guaranteed, and the waiting period varies from one company to another.

Statutory sick pay

If you have proof of sickness for four consecutive days, your employer is required by law to give you a statutory sick pay, which goes up to 28 weeks. The minimum weekly payment currently is £95.85. However, you can get more if your employer has additional occupational sick pay schemes like the one discussed above.

Conclusion

If you want to claim your income protection benefit successfully, the first step is to provide truthful information right at the application stage. Lying or exaggerating a crucial matter might land you in trouble when the time comes that you need the money so badly. Also, don’t rush for the benefit when you can still survive financially from alternative means like personal savings, state, or employer’s sick pay.

Note that income protection insurance only compensates you if you fall ill and are unable to work due to an accident or sickness. But what if the worst happens and you pass away? Will your family cope financially without your income? If not, then it’s important that you consider taking out family income protection instead.