Income protection is a type of insurance in the UK that provides a regular, tax-free income if you’re unable to work due to illness or injury. It’s designed to replace a portion of your earnings, offering financial support during recovery or longer-term incapacity, unlike lump-sum policies such as critical illness cover. In 2023, UK insurers paid out £579 million in individual income protection claims, helping people maintain stability when they couldn’t work ABI, 2023.
How It Works
- Purpose: Replaces a portion of your pre-tax income - often up to 50-70% - until you return to work, reach a policy end date (like retirement), or the coverage expires, depending on the terms.
- Coverage Trigger: Payments start if a UK medical professional confirms you can’t perform your job or a similar role, as defined by the policy.
- Duration: Can extend from months to decades, unlike statutory sick pay, which lasts only 28 weeks at £109.40/week as of 2024 Gov.uk, 2024.
Spirit’s Approach
Spirit Cover provides income protection with features included as standard:
- Trust Option: Policies can be placed in a trust at no extra charge, which may reduce inheritance tax liability (40% on estates over £325,000 HMRC, 2024), subject to individual circumstances and tax rules.
- Additional Benefits: Features like access to GP services 24/7 or physiotherapy support are part of the package, subject to policy terms.
Key Facts
- Distinct from critical illness (lump sum) or life insurance (death benefit) - it focuses on ongoing income replacement.
- Does not cover job loss or redundancy - only health-related inability to work qualifies.
- In 2023, 97.6% of individual income protection claims were paid, reflecting high reliability when terms are met ABI, 2023.
Is It for You?
If you depend on your income and lack sufficient savings, it’s an option to consider. Spirit’s advisers can explain how it applies to your situation - reach out for clear guidance.