Accident & Sickness vs Income Protection
Comparing the suitability for two very different self-employed professionals.
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Compare Accident & Sickness and Income Protection Insurance against one another and it suggests that some policies are perhaps more suited toward certain occupations than others. However, in deciding upon the most suitable for any individual, there are many other factors that must be considered.
To better explore some of these considerations and provide pricing examples of both policies, this article compares the potential suitability and affordability of both policy types for two self-employed professionals with very different occupations and personal requirements.
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What’s the difference between Accident and Sickness and Income Protection?
Accident and Sickness and Income Protection Insurance have many similarities with both offering financial protection should an illness or accident prevent the policyholder from being able to work.
The two main differences between the policy types are;
- The length of time that each provide coverage often referred to as the “Benefit Period” or “Payout Period”. This also determines how a policy maybe underwritten.
- The maximum amount of “Monthly Benefit” that insurers are likely to offer.
An Accident and Sickness policy will typically provide coverage for a capped payout period, often up to 2 years. These policies are generally not subject to full medical underwriting and are annually renewable. As a general rule-of-thumb, Accident and Sickness insurance tends not to exceed a monthly benefit of £2,500.
In contrast, Income Protection plans can provide cover for an individual right up until retirement age, offering long-term security in the event of more severe or permanent disabilities.
Once set up, Income Protection policies are intended to provide ongoing protection for several years and so will almost certainly be subject to medical underwriting. Whilst insurers are still likely to have limits on the maximum monthly benefit that they are prepared to cover, higher earners can obtain policies that will provide 65% – 70% of their gross earnings with Executive Income Protection policies extending cover for dividends and, in some circumstances, pension contributions and company car payments.
It is important to note that some insurers different terminology in describing their policies to that used above. For example, “Long Term Accident and Sickness” policies are often almost identical to what another insurer may simply call “Income Protection”.
Comparison Between Accident & Sickness and Income Protection
Comparison of the key differences between Accident & Sickness insurance and Income Protection.
| Policy Type | Covers Accidents | Covers Short-Term Illness | Covers Long-Term Illness | Payout Periods | Max Monthly Benefit |
|---|---|---|---|---|---|
| Accident & Sickness | Yes | Yes | No | Generally 24 months maximum | Generally £2,500 |
| Income Protection | Yes | Yes | Yes | 2 years up until retirement age | Up to 65 - 70% of gross income |
Please Note: The information provided in the table above is intended to provide a broad comparison of the key differences between Accident & Sickness insurance and Income Protection policies. It is important to note that some insurers may use different terminologies and have varying policy terms and conditions. The details in this table are for general informational purposes only and should not be considered as personalised advice or a recommendation. The specific coverage, payout periods, and maximum monthly benefits offered by insurance providers may vary. To obtain accurate and up-to-date information tailored to your individual circumstances, we strongly recommend contacting Black Lion Insurance for personalised advice.
Example Quotes
One way of illustrating what type of policy may be more suited to a particular individual is to take some examples of recent scenarios where Black Lion Insurance have been asked to provide quotes.
However, please note that the examples below are deliberately broad and do not consider the differing aspects of specific policies. They are only intended to provide readers with an approximate illustration as to the cost and potential suitability of each different policy.
In practise, the quotes and expert advice offered by Black Lion Insurance are always prepared for clients on an individual basis and considers each individual’s circumstances, needs and budget.
Self-Employed Construction Worker
Client Overview
Name: Alex
Occupation: Self-employed construction worker
Gross Income: £36,000 p/a
Age: 28
Smoker: No
Medical History: No pre-existing conditions
Marital Status: Single
Dependents: None
Savings: Equivalent to 1 months living expenses
Housing: Tenant
Client Needs
Whilst health and safety regulations help offset the hazardous risks posed by working in the construction industry, it is still statistically a far more dangerous environment than an office. Additionally, because of the physical nature of the work involved, sustaining an injury such as a broken bone could easily prevent Alex from working for 3-6 months. This is the main risk Alex is keen to offset although a policy that also covers illnesses within a budget of £25 per month would be ideal. Because Alex only has minimal savings the “Deferred Period” or “Excess Period” (the minimum amount of time a policyholder must be off work before the policy will pay out) needs to be just 30 days.
Indicative Quotes
Last updated:
Quotes based on a 28 year old self-employed construction worker with annual gross earnings of £36,000 and no pre-existing medical conditions.
| Policy Type | Monthly Benefit | Deferred Period | Benefit Period | Example Monthly Premium |
|---|---|---|---|---|
| Accident Only | £1,900 | 30 days | 12 months | £13.62 - £16.65 |
| Accident & Sickness | £1,900 | 30 days | 12 months | £21.50 - £32.00 |
| Income Protection | £1,900 | 30 days | 39 years | £51.00 - £72.00 |
Please Note: These example monthly premiums are based on quotes obtained from UK insurers using information from the client overview above. They are intended for illustrative purposes only and to assist readers better understand and compare the potential price differences between the insurance policies listed. These quotes are not personalised or tailored to specific individual circumstances and may not reflect the actual monthly premium or terms that an individual with a similar overview may receive. For accurate, up-to-date advice and personlised quotes readers should contact Black Lion Insurance.
Quote Analysis
In this scenario, Accident and Sickness provided Alex with the highest level of cover within his budget. Accident Only Insurance was also offered which was available below budget although would not have provided cover in the event that any illness prevented Alex from working. Although providing Alex with a much longer benefit period (39 years as opposed to 12 months), the lowest Income Protection quote available at the time was more than double the budget given.
Many workers in the construction industry, scaffolders, roofers, bricklayers in Alex’s position are likely to share similar concerns. However, this is not to say that an Accident Only or Accident & Sickness policy is always the best solution.
Income Protection policies will generally provide a more comprehensive level of cover although the monthly premiums can be comparatively much more expensive for policies with a 30 day deferred period. Increasing the Deferred Period of a policy can lead to more affordable monthly premiums so those with more savings should definitely consider comparing the affordability of a more comprehensive Income Protection policy.
Self-Employed IT Consultant
Client Overview
Name: AJ
Occupation: Self-employed IT consultant
Gross Income: £90,000 p/a
Age: 36
Smoker: No
Medical History: No pre-existing conditions
Marital Status: Married
Dependents: Two Children
Savings: Equivalent to 3 months living expenses
Housing: Owner Occupier
Client Needs
As a young parent, AJ runs a successful small business providing IT consultancy services to other small businesses. AJ’s partner only works part-time and takes on most of the responsibility for looking after the children. AJ’s primary concern is that should an injury or illness prevent them from working for a sustained period of time, the family would likely face extreme financial hardship. With a budget of no more than 1% of gross earnings (£75 per month), AJ wants a comprehensive policy that will provide a replacement income protection up until retirement age in the event that they are unable to work due to illness or injury.
Indicative Quotes
Last updated:
Quotes based on a 36 year old self-employed IT consultant with annual gross earnings of £90,000 and no pre-existing medical conditions.
| Policy Type | Monthly Benefit | Deferred Period | Benefit Period | Example Monthly Premium |
|---|---|---|---|---|
| Accident Only | £4,875 | 90 days | 24 months | £14.95 - £30.21 |
| Accident & Sickness | £2,500 | 90 days | 24 months | £25.50 - £36.00 |
| Income Protection | £4,875 | 90 days | 39 years | £58.00 - £92.00 |
Please Note: These example monthly premiums are based on quotes obtained from UK insurers using information from the client overview above. They are intended for illustrative purposes only and to assist readers better understand and compare the potential price differences between the insurance policies listed. These quotes are not personalised or tailored to specific individual circumstances and may not reflect the actual monthly premium or terms that an individual with a similar overview may receive. For accurate, up-to-date advice and personlised quotes readers should contact Black Lion Insurance.
Quote Analysis
In this scenario, AJ’s requirements immediately exclude any short-term Accident and Sickness policy from consideration. Only a long-term Income Protection policy will provide AJ with a benefit period of up to 30 years until retirement. Since AJ has savings that are equivalent to 3 months living expenses, a deferred period of 90 days is chosen which reduces the monthly premiums substantially.
Examples of such individuals could include freelance consultants, graphic designers, or accountants, whose work involves lower physical risk but may still be impacted by long-term health issues.
Conclusion
Before considering the suitability of either Accident and Sickness against Income Protection, it’s crucial to understand the main differences between the two types of policy. Those considering a policy should have a clear idea of the minimum level of cover that would make a policy effective should they need to claim.
However, given the many different considerations, seeking advice from an FCA-approved insurance broker is strongly advised. A professional broker, such as Black Lion Insurance, can offer precise and up-to-date advice tailored to the needs and budget of the client.
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