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What is short term income protection insurance?

We aim to help you understand what short term income protection is and how it works to protect you and your loved ones

A photo of Dom Limberg, the author

By Dom Limberg

Published on: 17 August 2022

5 min read

What is short term income protection insurance?

We admit it, sometimes income protection insurance can be confusing. This is because there are so many policy options to choose from, which is both a great thing and something that can make it hard to choose the right one.

There are 4 main types of income protection:

Here, we’re talking about short term income protection insurance. As the name suggests, this policy doesn’t cover you for as long, but there are several good reasons to consider getting this type of insurance.

Short term income protection insurance explained

You might want to know ‘what is short term income protection insurance?’, but realistically your first question could be ‘what is income protection?’.

Income protection insurance is a policy that is designed to provide financial support if you can’t work due to illness or injury. With short term income protection, the main points to remember are:

  • You will be covered for a set number of years, known as your policy term (the number varies depending on the policy you choose)
  • You will receive regular tax-free cash payments to cover part of your usual monthly earnings
  • The payments you get if you claim will usually cover between 50%-70% of your usual income, most often around 60%
  • You will only be able to receive a monthly benefit pay out from your policy for a set period of time (anywhere between 6 months to 2 years with most policies)
  • As long as you continue to pay for your policy each month (your premiums), you will be covered

What does short term income protection cover you for?

The main thing you will want to know is what exactly this policy will cover you for. With short term cover you can claim for a set amount of time (commonly 12-24 months):

  • If you are signed off work (due to sickness or accident) by a doctor or GP for 4 weeks or more
  • For a wide range of different illnesses and injuries or short term disabilities

Note: some policies and providers could have ‘exclusions’ (things you cannot claim for). Most commonly this will be something such as not being able to claim for sick leave related to a pre-existing medical condition you have.

EXAMPLE:

Jane has had a heart attack in the past. She has found a great deal for her new income protection policy, but the provider won’t pay out for heart related issues due to her medical history. She can however claim if she can’t work because of a wide range of other illnesses and injuries including:

  • Cancer
  • Stroke
  • Multiple Sclerosis
  • Parkinson’s Disease
  • And more…

We never want to spend more than we need to for anything, whether that’s for a new coat, the weekly food shop – or an insurance policy!

Income protection insurance can be very affordable and provides more security compared to relying on support like Statutory Sick Pay (SSP). We can’t tell you an exact price you will be paying, as every person’s background and needs will be different. How much you will pay for short term income protection will be based on:

  • How much cover you need
  • How long you want your cover to last for (length of policy term)
  • The insurance provider you choose
  • If you have a high-risk job or dangerous hobby (this can increase the price)
  • If you have any medical conditions
  • If you smoke
  • Your age when you apply
  • The length of time before your claim payments start (waiting or ‘deferred’ period)

Short term income protection vs long term income protection

Short termLong term
Lower cost compared to a long-term policyCan cost more compared to a short-term policy
Will have a maximum amount of time you can claim for (usually 12 or 24 months)Will pay out for the entire length of policy if needed (means you could claim for many years if you suffered from a very serious illness or injury)
Can claim multiple times during the policy with most providersCan claim multiple times during the policy with most providers
Will stop paying out after your claim period ends, even if you are still too unwell to return to workCan pay out until you either return to work, your policy term ends, or you retire from your job (whichever event happens first)

Short-term income protection insurance pros and cons

ProCon
Provides financial support while unable to work due to sickness or injuriesWill only pay out on claims for a set amount of time (usually 12 or 24 months at most)
Claim pay outs will cover between 50% to 70% of your usual income (after tax)There will be a ‘deferred’ period for most policies (a waiting period before your policy pay outs begin)
Regular monthly tax-free paymentsCan cost more if you are older, have a high risk job, dangerous hobby or medical conditions
Can take time to recover without needing to rush back to work before you are readyYou could have an ‘exclusion’ based on your policy, meaning you can’t claim for sick leave related to a medical condition you had when applying for example.
Flexible levels of cover to suit different budgetsLong term cover will be more expensive but will pay out for much longer than a short term policy
Will cost less than long term cover for most peopleSome insurers could decline to cover you depending on your health or job role

There are a lot of insurance providers offering short term income protection insurance, which is great as you have a lot of options to choose from. Which insurer will be ‘best’ will depend on your own needs and financial situation.

It is worth looking at each one and seeing if the policies available work well for the level of cover you need. Currently you can get income protection insurance from providers like:

  • Legal & General
  • Aviva
  • LV= (Liverpool Victoria)
  • Royal London
  • And more…

The short answer is anyone. A common thing people believe that isn’t true, is that you can’t get income protection if you are self-employed. This isn’t the case and self-employed people can benefit more than most from this cover.

Income protection insurance can cover pretty much any job role including:

  • Business owners
  • Teachers
  • Doctors
  • Dentists
  • Contractors
  • Sole traders
  • Vets
  • And more…

What can’t you submit an income protection claim for?

Most income protection policies won’t cover you for things such as:

  • Being dismissed from your job role
  • Being made redundant
  • Anything that has been ‘excluded’ in your policy (e.g. claiming for absences related to heart issues if you have had a heart attack before)

How do I buy short term income protection insurance?

If after reading this page you think short term income protection is right for you, the next step is knowing where to get it from.

To buy income protection insurance you can:

An insurance expert can advise you on the best available choices for income protection. They can even tell you if another form of insurance (critical illness cover for example) will work better for what you need.

Resources

Safe Workers – Average sick days in the UK 2022

Statista – Sickness absence rate in the UK 1995-2021

Citizen’s Advice – Check if you can get sick pay

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