Income protection insurance is designed to act as a financial buffer if you are unable to work due to illness or injury.
It is not an insurance policy that allows you to make a profit from your unfortunate situation. Income protection insurance simply puts you back into the same position you were in before your illness or injury forced you out of work.
The maximum amount of income you can replace through insurance is usually calculated using the after-tax earnings you have lost, minus the state benefit to which you are eligible. The resulting amount of income is then paid on a regular monthly basis, tax free.
Those living outside of the UK have reduced eligibility to state benefits, so the second level of payment assessment may have little impact on expat income protection claims. Overall, income protection typically pays out between 50% and 70% of your total gross earnings.
AES offer independent financial advice. We can help you to make sense of the particular features and facets on income protection policies, and help you to choose the right policy for you. It’s vital that you understand what your policy covers you for in order to avoid being unable to make a claim in the future.