3 min Read
11 Oct 2016

What is a deferred period on an income protection policy?

What is a deferred period on an income protection policy?

What is a deferred period on an income protection policy?The deferred period on a income protection insurance policy is the period between going off work and your income payments commencing. As an example an income protection insurance policy with a 4 week deferred period will commence income payments once the policyholder has been off work for a period of 4 weeks.

How long is the deferred period?

The length of the deferred period is selected when you commence an income protection policy and this would typically be between 4 weeks and 12 months. The longer the chosen deferred period the lower the monthly premiums will be on an income protection policy.

How do I choose the best deferred period for an income protection policy?

The best choice of deferred period will depend on your personal circumstances and you need to take into account the following two factors.

Cover provided by employer

If your employer pays you full sick pay for a period of time then it makes sense to set your deferred period from the date the sick pay ceases. There is no point in setting your deferred period for less than your full sick pay period as the insurance company will not pay out until you cease receiving income from your employer.

If you require cover for redundancy in your income protection policy then you need to take into consideration the amount of redundancy payment you will receive when setting the deferred period. As an example if you are likely to receive a redundancy payment equal to six month salary then it would make sense to set the deferred period at six months.

I would always recommend that you speak to a professional adviser specialising in income protection and life insurance. If you don't already know one, most people don't, then I have personally vetted the service provided by one income protection specialist.

Also, it is worth pointing out that they have received an average customer rating of 4.9 out of 5 on reviewcentre.com.

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Available personal savings

If you have access to personal savings then it would make sense to factor in this money when selecting a deferred period. If, for example, you have enough savings to replace your income for three months in the event of sickness, accident or redundancy then you would set a deferred period of three months.

Further reading

Article overview

Key points

  • Deferred period on a income protection insurance policy is the period between going off work and your income payments commencing.
  • The length of the deferred period is selected when you commence an income protection policy
  • The best choice of deferred period will depend on your personal circumstances and you need to take into account the following two factors.
    • Cover provided by employer
    • Available personal savings
  • Compare income protection quotes with this online income protection tool.

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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