Single parent income protection

I’m a Single Parent. What’s the Best Way to Protect my Income?

If you’re one of the 1.8 million single parents with dependent children in the UK, the thought that your family is entirely reliant on you and your income can be overwhelming. An income-protection plan can help give you the peace of mind that if you were unable to work due to illness or injury your essential outgoings would still be covered and your family would be taken care of financially.

How Does an Income-Protection Plan Work?

Income protection is an insurance policy that normally pays out a tax-free monthly sum to cover your essential commitments, either for a specified term or until you can return to work. It is designed to cover around 50% of your gross salary (depending on the plan you choose) in the event that you cannot work due to illness, injury or disability.

Are Different Types of Cover Available?

There are different types of income-protection insurance on the market, and it’s important you understand them so you can decide which is right for you:

Short-term policies: this type of policy is sometimes known as Accident, Sickness and Unemployment (ASU) insurance, and is designed to protect your income for a specified period of time, usually 12 or 24 months. You can opt for a plan that covers a specified debt (e.g. Payment Protection Insurance or Mortgage Protection Insurance) or a non-specific policy that will simply provide you with a regular income to fund your lifestyle.

Long-term policies: this type of plan will provide a regular income until you are able to return to work, or until the end of the policy term (usually around retirement age). Each insurer will specify a maximum policy term, and this will vary. Unlike short-term policies, this type of income protection usually won’t pay out in the event you are made redundant.

How Quickly does Income Protection Pay Out?

Claims on income-protection policies are subject to a waiting period: this is a period you agree to defer receiving payments, typically anything between two and 52 weeks from the date you are unable to work. Usually, the longer the waiting period, the lower the premiums.

How Much Cover Do I Need?

Before you decide on a type and level of cover, it’s important to look at what else you would be entitled to in terms of sick pay from your employer and/or statutory sick pay. By law, an employer must pay most employees statutory sick pay for up to 28 weeks, but some offer more than the minimum as part of a benefits package, so be clear on what support you would get.

You would want to look at income protection starting to pay out when any sick pay ceases, so choose your waiting period based on that. Think about what your essential outgoings are and choose a level of cover that will cover you comfortably – remember you can usually insure up to 50% of your gross salary (which is your salary before tax).

How Much Will It Cost?

Monthly premiums vary greatly as there are a number of factors that are taken into account:

Age: the younger you are, the cheaper your premiums are likely to be
Occupation: premiums will higher for someone with a job deemed as dangerous
Smoking: if you’re a smoker, income protection cover will cost more
Gender: your insurer may have a view on whether men or women tend to make more claims
Medical history: existing health problems may impact your premiums

Be sure to shop around before choosing income-protection insurance. Using multiple comparison sites can help you to find the right insurance at the lowest cost, or you could ask an insurance broker for advice.