Guide to full-term income protection cover

Becoming too ill to work isn't on anyone's to-do list, but in reality it could happen to any of us. And wouldn’t it be nice to have no worries about the financial consequences of getting sick? With full-term income protection, this is possible. It gives you the reassurance of knowing that whatever happens to your health, your earnings will be protected long into the future.

How income protection works

Income protection is an insurance policy designed to give you peace of mind that you'll still have money coming in even if you lose your income for medical reasons. If you’re covered by income protection insurance, you can make a claim if your health condition prevents you from working, and you'll receive your monthly payments if your claim is successful. Insurers will usually cover 50-60% of your pre-tax income – usually enough to cover life's essentials.

With a policy in place, you're covered for any medical problem you face – from physical injuries and mental health issues to illnesses like cancer – so long as it causes you to be signed off work by a health professional. Read more in our guide to what is and isn't covered by income protection insurance.

Benefit period

When you buy an income protection policy, one of the things you'll decide is what benefit period you’d like: it can be either full-term or short-term. The 'benefit period' refers to how long you'd receive monthly insurance payments if you were signed off work.

A full-term income protection policy would pay out for as long as you need it to – until you're well enough to go back to work, or you retire, or your policy ends. This is different to short-term income protection policy, which will only pay your benefit for a maximum amount of time – typically 1, 2 or 5 years, depending what you choose when you take out a policy. Unlike short-term cover, a full-term policy doesn't have a maximum benefit period, making it a more comprehensive option.

Waiting period

Another important feature of income protection is the waiting period, which all policies have. This refers to the amount of time you wait between becoming too ill to work and starting to receive your monthly payouts. Again, you choose this when you take out a policy, based on how quickly you'd need the financial backup.

What is full-term income protection?

If you’re too unwell to work and you've been signed off by a medical professional, full-term income protection cover pays out a monthly benefit for as long as you need the payments – until you're well enough to go back to work, you retire, or your policy ends (whichever happens first).

You can make as many claims as you need to on a full-term policy, whenever you find yourself unable to work for health reasons. But with full-term cover, your payouts could last longer than they would with short-term cover.

In theory, if you were unable to work indefinitely, a full-term policy could keep paying out for the whole length of your policy – whether that lasts several years, decades, or until you retire. This is different to a short-term income protection policy, which would only ever pay out for a fixed, maximum amount of time per claim (usually with a one, two or five-year ceiling).

Full-term vs. short-term income protection

Having full-term income protection in place means that no matter what the future holds, you’ll have a reliable source of income if you’re signed-off from work due to illness or injury. It’s more expensive than short-term income protection because it provides more comprehensive cover, so it might not be an option for you if you’re on a strict budget. However, it’s worth remembering that full-term income protection can often work out cheaper than other financial solutions, like relying on savings.

In many cases, short-term income protection can be adequate. With this kind of cover, you can still access the financial support you need for a relatively significant amount of time (much longer than sick pay, for example) and even for repeated instances of ill health. It can also be a useful way of buying you time to make other arrangements if your health affects your long-term financial stability – e.g. if you need to sell a house and downsize, two years of income protection could be enough to bridge the gap.

But of course, none of us can see into the future, and there’s no guarantee that you’d only ever experience health problems on a short-term scale. If you want to plan your family finances without any lingering doubt in your mind, full-term income protection gives you the foundation to plan the years ahead with confidence. Though do bear in mind that not every insurer will be able to offer you long-term cover. If you’re deemed a high risk due to your occupation or health history, you might only be eligible for short-term cover.

Should I get full-term income protection?

Life is unpredictable – but full-term income protection is about giving you certainty and stability as you build a future for you and the most important people in your life.

If you think about your own life, could you really manage over the long-term if your income was severely affected by illness? It’s one thing to muddle on for a few months, but if you couldn't work for longer than that – even for years – paying ongoing costs like the mortgage or rent, plus household bills, could quickly become a challenge if you’re unable to work. It could force you to use up savings, take on debt, or significantly change your lifestyle.

For most of us, life’s too short to spend time worrying about the financial consequences of our health deteriorating. And while short-term cover can be a valuable stop-gap, if you can afford the monthly premiums and you meet the eligibility criteria, full-term income protection gives you complete peace of mind in case you lose your income for health reasons.