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If you became unable to work because of an accident, illness, or injury, would you still be able to provide for your family? For most workers in the UK, losing the ability to work would be a financially devastating event - they would have no reliable means to pay their bills, buy groceries, or take care of their financial obligations. For this reason, UK income protection insurance is critical for anyone who depends on a job for economic survival.
The main purpose of UK income protection insurance is to provide a stable, tax-free source of income if you become unable to work because of an illness or accident. This not only helps you take care of your financial needs; it also reduces the stress that often comes with losing a regular, steady source of income. Recovering from an injury or illness is stressful enough without having to worry about how you are going to pay your bills.
Ordinarily, UK income protection insurance will allow you to replace up to 50 percent of your income; however, there are plans available that will allow you to increase your protection to 65 percent. Because the payments are made on a tax-free basis, the reduction in income will be partially offset by the fact that you will not have to pay taxes on payments received through the insurance plan. Without the reduction, it is possible that you would be financially better off than when you were working - a situation that goes against the very foundation of insurance.
There are two primary types of UK income protection insurance. The first type can be taken out until you reach retirement age. If you suffer an illness or injury which renders you unable to work, this type of insurance plan will continue making payments until you are at the age of retirement. While this plan provides the maximum level of protection, it is also the most expensive.
The second type of plan replaces your income for a short period of time, usually twelve months or less. If you become unable to work, this type of UK income replacement insurance gives you a financial buffer while you are recovering from your illness or injury. It is also considerably less expensive than long term income protection insurance, making it an affordable option for those who need limited coverage.
While getting UK income protection insurance will add another expense to your monthly budget, it can be a life saver if you ever suffer a significant illness or injury.