Rather than receiving a lump sum, this type of policy, sometimes referred to as Permanent Health Insurance, is intended to replace lost income for as long as a person is unable to work through sickness or disability. Following an initial deferred period (typically the period of time a person will receive sick pay from their employer), the benefit will be paid for a certain period of time. This can be to the end of the chosen term (which could be normal retirement age, the end of a mortgage term or a period of high expense such as children’s dependency), return to work or the death of the life assured, whichever is the sooner.

As with death benefits which are set up to protect income, we would recommend that Income Protection benefits include an element of indexation.