Income protection insurance

Income protection insurance, also known as long-term disability insurance or permanent health insurance (PHI), pays a monthly amount if you are unable to work because of an illness or disability.

It continues paying until you recover and go back to work, or until you die or reach the policy termination age, usually 65. The most you can insure is usually 60% of your gross income. Some policies use a with-profits or unit-linked investment base, allowing a cash return on retirement.

Many employers already offer this sort of cover. Others offer only limited cover. In the latter case, it may be worth taking out your own policy as well.

The terms of your policy will depend on how much cover you want, on your sex (women pay more) and on how long you are willing to wait between being unable to work and receiving some payment (deferred or waiting period).

The longer you will wait, the less you are likely to pay for the policy. Your job also influences how much you will have to pay, with white-collar workers generally paying less. Your general health and medical history will also effect your premiums.

In some cases, you will only be able to make a successful claim if you show you cannot do any job, rather than just the job you had been doing.