Guide to Income Protection Insurance – part 3 of 5

Before taking out income protection it's vital to make sure you qualify to be covered in the event of a claim. The Financial Services Authority (FSA) has discovered that many policies are sold even though the consumer is unable to make a claim or with the policy overrun with conditions. Make sure this doesn't happen to you.

Things to consider before you buy

Before you buy a policy, be sure to consider the following:

Terms and conditions - Make sure you qualify for cover against the policy's terms and conditions. Are you within their age bracket (usually 18-65)? Are you working 16hrs/week in full-time employment and usually have you been employed for six months or more? Do you live and work in the UK? If the answer to all these questions is "yes", then you are likely to qualify, but always check as policies vary.
Non-permanent contracts - Some insurers will accept you if you have been working for more than 12months, but be sure to check.
Redundancy and misconduct - Bear in mind you are not likely to be covered if you are fired from your job due to your own misdemeanour. Consequently, before buying a policy, consider your companies redundancy package - it might be substantial enough that you don't need cover.
Self-employed - You must inform the Inland Revenue if you cease trading. Some, but not all policies will cover you if you are forced to dissolve your business, but not if you do so on a voluntary basis.
Sick pay - Will your company pay you during a long-term illness? If so you could limit your cover to exclude sickness, therefore cutting your premium.
Money in the bank - Do you have enough to cover you in the event of a long-term absence from work? If so, why get cover?
Other insurance - Some other insurance policies, including health insurance, might cover a proportion of your salary rendering further cover unnecessary.
Pre-existing conditions - A number of policies will not offer cover if you already have a health issue. Be sure to check the terms and conditions and if in doubt, ask.

In part four we'll look at some more factors to consider before you buy.

Income protection guide part 4 >>>

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