Short Term Income Protection Insurance: Benefits and Costs

Short term income protection insurance provides financial support during unexpected periods of absence from work, such as illness or injury. This type of insurance can offer a monthly benefit to help cover living expenses and maintain a comfortable lifestyle.

The benefits of short term income protection insurance include providing a tax-free lump sum or monthly payments, which can be used to cover essential expenses. This can help alleviate financial stress and allow individuals to focus on recovery.

Policyholders can choose from a variety of benefit periods, typically ranging from 13 to 52 weeks. The length of the benefit period will depend on individual circumstances and the type of insurance policy chosen.

With short term income protection insurance, individuals can have peace of mind knowing they have a financial safety net in place. This can be a significant advantage for those who are self-employed or have variable income.

Short-term income protection insurance is a type of cover that provides temporary financial support if you're unable to work due to illness or injury.

It typically pays out for a maximum of 1 or 2 years, but some insurers offer a payment period of up to 5 years.

The cover can pay out up to 70% of your usual income, and payments are usually made on a monthly basis.

Payments aren't tied to a specific financial commitment, and they'll commence once your deferred period has passed.

You can make multiple claims throughout the policy term, and premiums start from as little as 20p-a-day.

Here are some key features of short-term income protection insurance:

You'll pay a monthly premium for a short-term income protection policy, which can be as low as 41p or as high as £17 a month.

Most policies pay between 50-60% of your salary if you need to activate them, but some, like Bettersafepay, pay 65% of your existing salary or £2000 a month, whichever is less.

Payments are tax-free, but you might want to keep paying your national insurance contributions so you get a full pension when you retire.

The standard term for short-term income protection policies is 24 months, but you can choose to have benefits paid out for anywhere from 12-60 months.

You'll typically need to wait 6-12 months before you can make a claim, depending on whether you receive sick pay from your employer.

Short-term income protection has a deferred period, which is the time you have to wait before receiving benefits if you become unable to work. This can be as little as one month or up to 52 weeks.

The length of the deferred period depends on your personal circumstances, such as whether you're employed or self-employed. If you receive 12 months of statutory sick pay, you might opt for a 52-week deferred period.

Longer deferred periods can mean lower monthly premiums, which is why some self-employed individuals might prefer to rely on their savings for several months and pay lower monthly payments into their policy.

Income protection will start to pay out if you develop an illness or injury that prevents you from working, and your condition meets your policy's definition of incapacity. You'll need to be unable to work for longer than your deferred period for payments to commence.

For example, if you opted for an 8-week deferred period, you'd need to be unable to work for 8 weeks before your payments start. Payments will end once you recover and return to work or the time period specified in the policy expires.

Short-term income protection policies pay out if you're unable to work due to long-term illness or debilitating injuries from an accident.

The payments will start once you've exceeded your policy's deferred period, which can range from 6-12 months, depending on whether you receive sick pay through your employer.

You'll receive a percentage of your usual salary, with most policies paying between 50-60% of your salary, although some policies like Bettersafepay pay up to 65% or £2000 a month, whichever is less.

Payments are tax-free, but you may want to continue paying your national insurance contributions to receive a full pension when you retire.

The payout period can vary from 12-60 months, with a standard term of 24 months, giving you flexibility to choose how long you need benefits to be paid.

The amount you receive will depend on your income, with some policies paying out up to 70% of your usual earnings in monthly (tax-free) payments.

A short-term income protection policy typically lasts for a maximum of 5 years, although you can choose a shorter or longer term to suit your needs. This period can be as short as 1 year or as long as 5 years.

The benefit amount you receive will depend on your income, and most policies pay out between 50% to 70% of your usual income. This amount is tax-free and will be paid out in monthly payments.

The policy term is the length of time your cover will last for, and you can choose a term to meet your needs. However, insurers often require your cover to cease by your 70th birthday.

Here are the typical policy terms and conditions:

Short-term income protection covers you for illness and injury that prevents you from working, providing tax-free monthly payments to help cover essential expenses.

These payments can help with mortgage or rental payments, which in the UK average £1,327 per month for rental costs and £1,441.36 per month for mortgage repayments.

Bills and utilities, such as gas and electricity, which can cost around £143.10 per month for a 3-4 bedroom house, are also covered.

Childcare costs, averaging £302.10 per week for full-time care, are another essential expense covered by short-term income protection.

Debts and loan payments, including unsecured debt of £4,287 per UK adult, can be covered to help prevent financial strain.

Leisure costs, such as a gym membership and TV subscriptions, which average £169 per month, are also included.

Other living expenses, like petrol, public transport, food shop, and phone bills, are also covered.

This means you can claim for any illness or injury that prevents you from working and meets your definition of incapacity, as long as it's not self-inflicted or related to substance misuse or pre-existing conditions excluded from your cover.

Here's a breakdown of the average monthly costs covered by short-term income protection:

Your short-term income protection policy will have specific terms and conditions that you should be aware of.

The benefit amount is the amount you'll receive each month, which is typically between 50% and 70% of your usual income.

Your policy term is the length of time your cover will last, and you can choose a term that meets your needs.

To be eligible for a claim, your condition must meet your policy's definition of incapacity, which is usually an own occupation definition.

You'll also have a deferred period, which is the amount of time that must pass before your payments start. This can range from 4 to 52 weeks.

The payment period is how long you'll receive payments, which is typically a maximum of 1, 2, or 5 years.

There are different types of premiums, including guaranteed, reviewable, and age-based premiums.

Here are some key terms to consider when choosing your policy:

| Premium Type | The type of premium you'll pay, including guaranteed, reviewable, and age-based premiums.

Guaranteed premiums are a fixed monthly payment that stays the same, allowing you to budget with certainty.

Reviewable premiums, on the other hand, may appear more attractive at first but can end up costing you more if payments increase year on year.

With guaranteed premiums, you know exactly how much to set aside each month, giving you peace of mind and financial stability.

If you opt for reviewable premiums, be prepared for the possibility of increased payments, which could put a strain on your finances.

Guaranteed premiums are the way to go, especially if you're on a tight budget or have a fixed income.

Reviewable premiums may be less expensive upfront, but the potential for increased payments down the line is a risk you may not want to take.

Policy costs can vary depending on your age, with younger people often paying less. For example, a 20-year-old non-smoker can expect to pay around £5 per month for a short-term income protection policy.

The length of the policy term and deferred period also impact costs. A 3-month deferred period, like the one mentioned in the example quotes, can affect the price you pay. In the example, a 30-year-old non-smoker pays £5.68 per month.

Your occupation and lifestyle can also affect your premiums. Specialist jobs and manual labour skills tend to carry higher premiums, as mentioned in the article. This means that your career choices can impact your policy costs.

Here's an example of how different ages affect the cost of a short-term income protection policy:

Policy costs can vary depending on several factors, including your age, which significantly impacts the premium.

The length of the benefit period, typically ranging from 1 to 2 years, also affects the cost. The longest benefit period available is 2 years.

Your occupation, whether you smoke, and your current health, including any medical history or hereditary conditions, all play a role in determining the premium.

Monthly payments are calculated per £100 of cover and can range from 41p to £17 per month.

You can choose between accident and sickness cover, redundancy cover, or both, which will also impact the policy cost.

Here's a breakdown of the factors that influence policy costs:

The cost of short-term income protection insurance can vary depending on several factors, including your age. Typically, monthly payments range from 41p to £17 per month for every £100 of cover.

Your age is a significant factor in determining the cost of your policy. For example, a 20-year-old non-smoker could pay just £5.00 per month for a policy, while a 50-year-old non-smoker could pay £11.87 per month.

The length of the benefit period is another important factor. You can choose a policy with a benefit period of 12 months, 24 months, or even up to 5 years. The longer the benefit period, the higher your monthly premium will be.

Here's a breakdown of the monthly premium for a non-smoker in good health, earning £30,000 per year, with a 3-month deferred period and 12-month payment period:

Keep in mind that these prices are just examples, and your actual premium may vary depending on your individual circumstances.

You can make a claim on your short-term income protection policy if you're diagnosed with an illness or sustain an injury that prevents you from working.

To start the process, contact your insurer directly - you should be able to find their contact details and instructions on their website.

You'll likely be sent a claims form to complete and return, which will require information about your condition and earnings.

You'll need to provide medical evidence of your condition, such as a doctor's note, and proof of your earnings.

To make a claim, you'll need to contact your insurer directly. You can find their contact details and instructions on their website.

You'll likely be sent a claims form to complete and return. This form is essential to initiate the claims process.

You'll need to provide medical evidence of your condition, which could be a doctor's note. This documentation will help your insurer assess your claim.

You'll also be asked to provide evidence of your earnings. This is to verify your income before you made the claim.

Once your insurer has all the necessary information, they'll assess your claim.

Redundancy can be a stressful and uncertain experience, but it's essential to understand what's covered and what's not when it comes to making a claim.

Short-term income protection won't cover you for redundancy, so it's crucial to know that from the start.

You'll need to look into other forms of protection or support to help you through this difficult time.

Income protection, on the other hand, will cover you for illness and injury, so it's worth considering if you're not already covered.

This can provide a vital safety net and help you get back on your feet more quickly.

If you're self-employed or a contractor, you're likely aware of the risks that come with irregular income. For self-employed individuals or freelancers, Short-Term Income Protection Insurance can be a vital risk mitigation tool.

In the gig economy, where irregular income is common, having a policy in place can safeguard against financial hardship during periods of reduced or no earnings.

You can receive up to 70% of your usual income if you're unable to work due to illness or injury.

Short-term income protection policies are designed to pay out on a short-term basis, typically for a maximum of 1, 2, or 5 years.

To find the best available deal on a policy that meets your needs, you can compare short-term income protection through Reassured's advised team.

Here are some key points to consider when looking for short-term income protection cover:

Securing the right insurance coverage is crucial when it comes to short-term income protection.

You should always check the policy terms and conditions to ensure you're securing the right cover, as it's essential to fully understand your policy.

A healthy lifestyle can also help you secure the cheapest premium price, so make sure to lead a healthy lifestyle.

To make the most of your insurance, consider using a broker to compare multiple quotes at once.

Typical illnesses covered by STIPs include stress, anxiety and depression, cardiovascular issues, strokes, cancer, loss of a limb, multiple sclerosis or Parkinson's disease.

These conditions must be classified as causing incapacity to work and be supported by evidence from a medical practitioner or mental health professional.

Some policies may not cover every type of illness, so it's essential to check with the insurance company before taking out STIP.

In fact, it's estimated that up to 70% of your usual income could be paid out on a monthly basis if you're unable to work due to illness or injury.

This can help you stay afloat while you're off work, and the payments are tax-free.

Here are some examples of what STIPs can cover:

Note that there isn't a specific list of conditions included with your policy, so you can claim for any illness/injury that prevents you from working and meets your definition of incapacity.

If you're considering short-term income protection, it's essential to know what's not covered. Here are some exclusions to be aware of:

Self-inflicted injuries are not covered, so be honest with your doctor and insurer about any self-harm.

Illnesses you were aware of before taking out the insurance policy are also excluded, so make sure to disclose any pre-existing conditions.

Substance abuse-related illnesses or accidents are not covered, either, so be cautious with your lifestyle choices.

Early retirement, voluntary redundancy, or seasonal unemployment are not covered, so don't rely on short-term income protection for these scenarios.

Loss of employment due to coronavirus is specifically excluded, so consider this in your risk assessment.

If you were aware of redundancy prior to taking out the policy, you won't be covered, so be mindful of your job security.

Here's a summary of what's not covered:

Short-term income protection insurance can be a valuable safety net, but it's essential to understand how it works before buying a policy. Policies typically offer protection for a fixed duration, usually a maximum of two years.

If you're considering purchasing STIP, assess your personal and family financial needs to determine the right level of coverage. This will help you establish whether short-term or long-term cover is better suited to your needs.

Before opting for STIP, carefully consider factors such as the waiting period, benefit duration, and coverage limits. This will help you avoid surprises when a claim needs to be filled.

Some key things to keep in mind when purchasing STIP include:

By understanding these factors and assessing your individual needs, you can make an informed decision about whether STIP is right for you.

Short-term income protection (STIP) is a type of insurance that provides financial support when you're unable to work due to illness or injury. It's designed to be more affordable than long-term income protection and can be a great option for those on a tight budget.

STIP policies typically offer coverage for a fixed duration, usually up to two years, and can help manage your monthly income and expenses when you're receiving statutory sick pay. This can ensure that bills, mortgage, and other expenditures are covered despite a reduced income.

One of the key features of STIP is its limited duration of coverage, which makes it well-suited for addressing temporary issues. Policies can span from a few months to a couple of years, providing support during brief periods of illness, injury, or involuntary unemployment.

STIP is particularly useful for self-employed individuals, freelancers, and entrepreneurs who don't have employer-sponsored disability benefits. It acts as a crucial risk mitigation tool, offering peace of mind and allowing individuals to focus on their recovery or job search without the stress of financial strain.

Before purchasing STIP, it's essential to consider factors such as the waiting period, benefit duration, and coverage limits. Assessing personal and family financial needs is crucial to determining the appropriate level of coverage.

Here are some key considerations to keep in mind:

Some scenarios will not be covered by STIP policies, including pre-existing health conditions or illnesses, self-inflicted injuries, voluntary redundancy, and seasonal unemployment.

At Bettersafe, we offer a unique income protection policy that protects 65% of your income or up to £2000, whichever is the lower.

Our policy rates are competitive and push the boundaries further than most insurers are prepared to go.

If you're able to return to work part-time, you'll still be entitled to receive benefits as long as you're not working more than 75% of your usual hours.

Our income protection policies are designed to provide peace of mind, knowing you'll have a financial safety net in place.

Bettersafe's income protection policies offer flexible and comprehensive protection for your finances.

Before you purchase short-term income protection insurance, there are a few key considerations to keep in mind.

The cost of the policy will depend on several factors, including your age and the length of the benefit period, which can range from 41p to £17 per month for every £100 of cover.

The length of the benefit period is a crucial factor to consider, as it determines how long the policy will pay out for. Currently, the longest benefit period available is two years.

The waiting period is also a key consideration, as it's the time before your payments kick in.

Your age will also impact the cost of the policy, so it's worth considering this when choosing a policy.

Here are the main factors that affect the cost of short-term income protection insurance:

If you're looking for long-term income protection, you might consider life insurance with a disability rider, which can provide a tax-free income stream if you become disabled.

Long-term care insurance can also provide financial protection if you need ongoing care, often with a focus on activities of daily living.

Some employers offer long-term disability insurance as a benefit, which can provide a percentage of your salary for an extended period.

The key difference between short-term and long-term income protection is the duration of benefits, with short-term typically lasting up to two years and long-term extending for several decades.

Long-term disability insurance usually requires a longer waiting period before benefits kick in, often 90 to 180 days, compared to short-term which may have a shorter waiting period of 30 to 90 days.

At Bettersafe, we understand that life can be unpredictable and financial stability is crucial. Our income protection policy is designed to protect 65% of your income or up to £2000, whichever is the lower.

We're proud of our competitive rates, which push the boundaries further than many other insurers. This means you can enjoy peace of mind knowing you're protected in the event of an unexpected setback.

If you're unable to return to work full-time, you'll still be entitled to receive benefits as long as you're not working more than 75% of your usual hours. This flexibility is a key benefit of our STIPs.

Our friendly advisors are just a call away, ready to answer any questions you may have about our income protection policies.