What is a deferred period on an income protection policy?

4 min Read Published: 01 Apr 2020

What is a deferred period on an income protection policy?

What is a deferred period on an income protection policy?The deferred period on an income protection insurance policy is the period between the first day of you being unable to work (through illness or injury) 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, although it can be shorter. 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:

How much sick pay do you receive from your 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 stop 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 from your employer (if any) 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 that specialises 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 over 10,000 reviews through independent review site Trustpilot, with 98% of reviews rating them as either ‘Excellent' or ‘Great'. Additionally, if you take out a policy you will qualify for £50 cashback.

Find the best value income protection policy for you*

Get a tailored income protection insurance quote in minutes, comparing the whole market

Find the best value income protection policy*

Available personal savings

If you have access to personal savings then it would make sense to factor this money when selecting a deferred period as it will save you money on your monthly premiums. If, for example, you have enough savings to replace your income for three months in the event of sickness, accident or redundancy and your employer would pay you full pay for three months, then you should set a deferred period of six months.

Further reading

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article – LifeSearch