Income protection policies have a number of flexible features, one of which is the deferred period. The deferred period may also be referred to as the waiting period, as it is the period of time between you first being off work ill to when your income protection policy begins to pay out.
It is up to the policy holder to decide how long this time period should be and is normally determined by the sickness benefits paid by their employer. For example if you receive 6 weeks sick pay from your employer and perhaps have savings which would last you for another 6 weeks, it would be unnecessary to have an income protection policy which pays out before 12 weeks. If your employer provides sick pay for 12 months, you would not need to receive benefits for your income protection policy for 12 months.
It may be however your employer does not provide sick pay or that the benefits are limited, and therefore you require a shorter deferred period. If you are self employed then it may be necessary for you to take out cover which starts from day one.
The premiums of your income protection insurance are dictated by a number of factors including the deferred period. The shorter the deferred period that you choose, the higher your premium will be.
Insurers perceive an increased likelihood of you making a claim if you have a shorter deferred period. If you have to wait for 12 weeks, you will be more likely to return to work by then; compared to if you only had a deferred period of 3 weeks.
Ideally the longer you can get by without needing your benefits to pay out, the cheaper your premiums will be.
There are other amendments you can make to reduce the cost of your income protection policy. An independent Financial Adviser from Endsleigh will be able to talk you through your options after fully assessing your needs. As Endsleigh’s advisers are independent they can search the market on your behalf, looking for the most competitive offering.
To speak to an adviser please click here or call 0800 389 2193
