Protecting you and your estate

Income replacement insurance


Income replacement insurance is, like serious and critical illness insurance, something everyone, including the self-employed, should consider as it helps replace part of your regular working income in the eventuality you are unable to work as a result of illness, accident, unemployment or involuntary redundancy.

Our job security, and therefore our income, is at the mercy of health issues, injury and the economy. Should we become unable to work through ill-health or unemployment, research shows that most of us will run into varying degrees of financial difficulty within just a few months.

Income replacement insurance addresses this need by providing financial support. As with most insurance policies, you can choose the level of cover you want in terms of the risk you are insured against and the level and term of the payment you receive.

There are various types of cover, the common ones include:

  • Income protection (IP)

    Sometimes referred to as permanent health insurance or ‘PHI’, this replaces your salary if you are off work for a long period of time.

  • Short-term income protection (STIP)

    This provides a monthly income for a relatively short, pre-agreed period (usually 12 to 24 months).

  • Accident and sickness cover

    This offers a lump sum, daily allowance or combination of the two for a given period.

  • Accident, sickness and unemployment cover (ASU)

    This is the same as accident and sickness cover but also includes redundancy cover

  • Payment protection insurance (PPI)

    Sometimes known as credit, credit protection or loan repayment insurance policies, these enable specific loans or debts to be repaid, usually for a fixed period of time. Unfortunately, as we all know, PPI has been heavily mis-sold over the years.

Income protection insurance is universal in how it can be used for and, unless you choose a cost-saving short period of time, you’ll continue to receive it either for as long as you are unable to work or until the policy expiry date, whichever comes first.

However, some income protection products – such as payment protection insurance, mortgage payment protection insurance and accident, sickness and unemployment insurance – are either specific, for example, covering just your mortgage repayments, or are only payable for a relatively short, set period of time, usually up to a maximum of 24 months.

Think it through

As with any type of insurance policy, you only get what you pay for – but it’s also easy to pay for cover that you may not need which is a false economy.

It’s certainly worth taking the time to work out the risks you feel exposed to along with the level of cover you actually need as the greater the level of cover, the higher the cost of the premium. Your mortgage payments may already be covered; if you’re a joint breadwinner any payout only needs to cover your contribution and, of course, you could ‘pull your belt in’ and cut down on any unnecessary outgoings.

It’s usual for there to be a deferment period before payments are made and if you can increase this you should see a noticeable drop in the size of the premium. You can also choose whether you receive payments for a limited period of time, say six months, or until your planned retirement date.

How can One Financial Solutions help you?

‘Hope for the best but plan for the worst’ is a common maxim – but many of us just ‘hope for the best’ and then don’t do any planning at all.

One Financial Solutions is here to help you. As a firm of independent financial advisers we can provide impartial advice to help you identify the potential risks you face and develop a strategy that provides protection from their consequences. We’ll recommend the best products from across the whole of the financial services market and help put in place the safeguards you need to protect both you and your dependants.

We can also provide a comprehensive estate planning service to complement the financial advice we give you. Helping you preserve everything you’ve worked so hard to achieve and ensure that it’s passed on to who you want is a natural extension of what we do.

So, if you’re looking for help with any aspect of protecting either yourself or your estate, please call us on 020 3714 9565 or ask us to call you by sending an email to