About life insurance. Is income protection worth it?, Anorak

The question to ask yourself is: if you were too unwell to work, would you be able to keep up with the cost of life? The answer to this will tell you whether or not it’s worth getting covered. Income protection insurance.

Does income protection cover me if I’m made redundant?

No, income protection insurance only covers you for loss of earnings that are brought about by medical reasons – mental or physical, illness or injury. Although redundancy is something that can also cause unexpected financial hardship, income protection is not the right insurance product to protect yourself against this risk, because it won’t pay out in that circumstance.

Will my income protection insurer pay out?

If you’re unable to work for medical reasons then yes: the policy will pay out, so long as a doctor signs you off as being unfit to work and you meet your insurer’s definition of incapacity. It’s important to know how your insurer will assess this; in many cases it’ll be on what’s known as the own occupation definition. This means if you’re no longer able to do the main tasks your job requires because of your illness or injury, your policy will pay out.

5 year term insurance

How long your income protection policy pays out for while you’re unable to work depends on what type of cover you have. Short-term cover will pay out for the fixed amount of time agreed in your policy (e.g. 1, 2 or 5 years) or until you’re well enough to return to work; long-term cover will keep paying out until you’re well enough to return to work or your policy ends. It’s also worth bearing in mind that your income protection won’t start paying out until after your waiting period, also agreed when you take out a policy.

This is also a good point to mention the importance of full disclosure when applying for cover like this. Most rejected claims are due to what’s called ‘misrepresentation’ – in other words: providing inaccurate health and lifestyle information when you apply for a policy. We’ll always remind you to be as accurate and honest as possible about you, your health and your lifestyle when you first take out the policy – as that way, your income protection policy will be most likely to pay out if and when you need it to.

General insurance

Is income protection insurance worth it for you?

It depends what losing your income for health reasons would mean in your circumstances. If it could cause you significant financial hardship and you can’t live with that risk, it could be a very worthwhile kind of cover to have in place.

Anorak exists to help you work this out. With our online tool, we ask a few quick questions about your life and finances to calculate how much cover you need (if any). If it's worth you getting cover, we'll recommend the right options for you and match you to policies from the whole market, only showing you the ones that are genuinely suitable. So it's easy for you to make the right choice.

Life insurance questions

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