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Disability Insurance

In the UK, disability insurance - also known as income protection insurance - offers workers of all ages (but generally those over 50) a safety net in the event they need to take a sabbatical from work because of sickness of injury.

Much like a state welfare system, you pay into your insurance premium out of your monthly wage packet, and receive payments to support yourself until you are ready to earn again.

Why do I need disability insurance?

For healthy, able-bodied people, disability insurance generally isn't a top priority. This is because of our in-built tendency to feel invincible when we're young, and only ever imagine the worst kinds of personal disasters happening to other people.

Accidents can strike at any time though, and the reality is that British law in its present state massively favours employers. If you become unable to work, your company will only have to support you financailly for a fixed period of time (as outlined in your contract) before pulling the plug and leaving you on your own.

Of course, there is always the option of applying for government support schemes, but they aren't always sympathetic to the needs of those who need them most. Your application could be rejected for arbitrary reasons, and even if it isn't, the amount you will receive to live on is generally a pittance.

By contrast, a private insurance scheme will provide you with a liveable weekly wage, ensuring that you don't end up having to sell your home in order to get by.

What are the terms and conditions?

Though private insurers aren't nearly as stringent as welfare officers, they can be fairly strict about what is and isn't covered (and therefore when they do and don't pay out).

The boring answer to this question is that it varies massively from each premium to the next. Some policies will allow you to make a claim for a single night in hospital, for instance, whilst others will require a minimum stay of one week before making any payment.

On a similar note, disability insurance entitlements are calculating by taking your (pre-tax) salary and determining how much you need to lead a comfortable life over the period of your illness or injury. Theoretically, you could be entitled to hundreds of thousands, although most will probably have to settle for between 50 and 60% of their annual gross earnings.

Keep in mind that the relationship between disability insurance and disability benefits (as provided by the state) can be a little murky. You are entitled to apply for both, although government schemes are typically means-tested, which means you will likely lose out altogether once your insurer starts paying out.

Which companies provide disability insurance?

There are number of UK companies currently selling disability or income protection insurance. Below are some of our top recommendations.

Aviva

One of the most generous insurers on them market, Aviva pay out a maximum of £240,000 per year. New customers must be aged 59 or over.

April UK

April UK is the only insurer that offers to cover 100% of your gross pay (although keep in mind this will only apply for earniers of £18,000 or less).

Legal & General

L&G offer to pay 60% of your earnings with a maximum cap of £36,000 a year. New customers must be at least 59.

AIG

Catering to a slightly younger demographic, AIG insure workers of 54 and up. Maximum pay out is 60% of income up to £150,000 per year.

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