Not being able to work due to illness or injury isn't all Oprah marathons and shower-free weeks. With bills coming in as usual, you'll need an income stream adequate to your usual expenses.
If you have dependents, a partner who relies on your income to help meet expenses, and/or a mortgage or loans, income protection could be vital to maintaining your family's lifestyle should you fall ill.
You might also decide to take out income protection for a limited time — for example, until your children are self-sufficient, or you pay off your mortgage.
First, there's a waiting period. You choose this with your policy — usually 2 weeks to 2 years — and it reflects how long you could afford to be off work before your income protection payments kick in. (Note a longer period should mean a cheaper premium.)
If you're off work with a covered illness or injury monthly payments will be made after the waiting periods.
These continue for the benefit period, which is the maximum time over which you'll receive payments (regardless of how long you're unwell). This is also set by you upfront, usually at 2 or 5 years or until the age of 65.
The maximum benefit is 75% of your gross income, but you can opt for less when you take out your policy.
The premiums on your income protection are tax deductible, and any benefits paid count towards your taxable income.
Some insurers let you choose between agreed value and indemnity contracts.
Insurance quotes take into account personal factors such as your age, medical history and occupation, along with policy preferences such as the waiting period, benefit period and maximum benefit.
Most basic income protection insurance covers such things as:
Comprehensive income protection insurance can also include: