The cover that someone needs will depend on their individual financial and personal circumstances, according to Martin Sincup, income protection manager of LV.
Mr Sincup says LV has two tools available to help advisers calculate the level of income protection that a client needs: a shortfall calculator and an interactive budget planner.
The shortfall calculator can be used to highlight the drop in income a client would suffer if they didn’t have protection.
The budget planner helps clients to ascertain how much cover they would require to meet their regular financial commitments if they were unable to work.
Julie Higman, income protection product manager of Aviva, says the amount of income protection required is usually a percentage of gross salary up to a maximum of 60 per cent of salary.
She says this percentage is an average bearing in mind tax and national insurance are taken from earnings as you would not normally expect to cover 100 per cent of a person’s salary.
If the client is self-employed, Dougy Grant, protection director of Aegon UK, says the company accounts will show the client’s declared earnings.
He says if they do not take a salary from the company, for example, a limited company, then the benefit amount is based on an average of two to three years net profit for the company.
Advisers must also consider the maximum sum assured by insurers, according to Kevin Russ, technical manager of Friends Life Individual Protection.
Mr Russ says the maximum sum assured can vary significantly between providers and there is normally an overall limit to what a client can purchase which is expressed as a percentage of their gross salary.
