PROTECTION GUIDES

Income protection for foster carers

If illness or injury meant you could not care for a child, your fostering income could stop. Here is how insurers look at fostering, and what to check.

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The short answer

Foster carers can often take out income protection, which pays a monthly benefit if illness or injury stops them working. Insurers differ in how they classify fostering and in how much of your fostering income they count, particularly the split between allowances for a child's costs and fees paid to you.

Because qualifying care relief can mean your tax documents show little income, statements from your fostering service are often important evidence.

What happens to your income if you cannot care

Fostering is demanding, physical and emotional work. If a serious illness, an injury or a period of poor mental health meant you could no longer care for a child, the placement may need to move and your fostering payments could stop or reduce.

For households where fostering is the main or a significant source of income, that can leave the mortgage or rent and everyday bills without the money that normally pays them. Foster carers are generally not employees, so there is usually no sick pay to fall back on.

How insurers classify fostering

Insurers set premiums and terms partly by occupation. Fostering does not fit neatly into standard categories, and insurers take different views of it. Some treat it as a paid occupation in its own right; others may apply more limited terms, such as a lower maximum benefit or a narrower definition of incapacity.

The definition matters. A policy that assesses whether you can carry out your own occupation of fostering is likely to be more useful than one that only pays if you cannot do any work at all. Our income protection product page explains the different definitions.

How your fostering income is assessed

Fostering payments are often made up of two parts: an allowance intended to cover the child's living costs, and in many cases a fee or reward payment to you as the carer. Insurers differ in how they treat each part. Some count only the fee element as your earnings, while others take a different approach, and this can make a large difference to the maximum benefit.

Many foster carers pay little or no income tax on fostering income because of qualifying care relief. That means tax calculations may not reflect the full amount you receive, and insurers may rely on other evidence.

•Statements from your fostering service or local authority showing what you have been paid
•Tax calculations or returns, including any other self-employed or employed earnings
•Details of how your payments are split between allowances and fees

Worth knowing

The benefit is limited to a proportion of the income the insurer accepts as eligible, and the evidence is usually checked in full at claim. Agreeing how your income will be treated before you apply helps avoid a shortfall later.

Who it suits, and when it may not be needed

Who it can suit

•Foster carers whose fostering income pays a large share of the household's bills
•Single foster carers with no other household income
•Carers with a mortgage or rent that depends on their fostering payments

When it may not be needed

•A partner's income would comfortably meet the household's essential bills on its own
•Your savings would cover your essential costs for a long absence
•The fee element of your payments is small, so the benefit an insurer would allow would add little

What affects the amount, length and cost

•How the insurer classifies fostering and which definition of incapacity it offers
•How much of your fostering income it accepts, and any overall limit it applies
•The deferred period, chosen against how long your savings would last
•Whether the policy pays until retirement or for a limited period on each claim
•Your age, health and smoking status

Income protection pays for incapacity through illness or injury. It does not cover a placement ending, a gap between placements or a change in how many children you care for. If you would also want a lump sum on a serious diagnosis, critical illness cover works differently and can sit alongside it.

Next steps

Gather recent payment statements from your fostering service or local authority, any tax records and a figure for your essential monthly spending. Terms for foster carers vary more than for most occupations, so we will check with insurers how they would treat your income before you apply. If you have a health condition to declare, we can help with that too; get in touch to talk it through.

A recent case

Real examples of cover we have recently arranged. Customer details are anonymised.

Life, critical illness and income protection

Combining four policies to protect a foster carer with high blood pressure

The situation

A foster carer came to us wanting to protect her family and her financial independence if she became seriously ill, could no longer work, or died.

If illness stopped her fostering, her fostering income would stop with it, and she would need another way to meet household costs. She also had high blood pressure and had recently had surgery.

What we recommended

•£100,000 of life cover with Vitality to age 75, including terminal illness benefit subject to the policy definition, to help her family with funeral costs, outstanding debts and housing costs.
•£50,000 of critical illness cover with Vitality to age 75, covering 114 conditions. The £50,000 is roughly a year's earnings, giving her a financial buffer during recovery. It pays the full £50,000 for a qualifying condition, or a reduced amount for a less severe one, depending on severity and the policy's claim definitions.
•Income protection combining policies from LV= and British Friendly, with a total selected benefit of £3,500 a month and cover to age 68. Cover started from day one, without a referral process or medical tests. Both policies have a 4-week deferred period, so payments begin once she has been unable to work for 4 weeks, and pay out for up to 2 years in total for any one claim.

The outcome

Four policies covering three needs: life cover for her family, a critical illness lump sum, and a replacement income if she cannot work.

Her high blood pressure and recent surgery were considered during underwriting, and under the accepted terms no specific exclusions were applied for those disclosed conditions.

Income protection payments remain subject to each policy's waiting period, claim terms and financial limits, including how benefits from the two policies interact. The policies' standard terms and claim requirements still apply.

Every case is different. The cover, terms and premiums available to you depend on your circumstances and each insurer's underwriting.

Talk to us about income protection as a foster carer

Tell us how your fostering payments are made up, what else you earn and what your essential bills are, and we will look at how different insurers would treat your income. There is no fee for our advice.

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How CoverLife can help

CoverLife Insurance gives personalised protection advice, with a dedicated adviser for your application and ongoing support. We have access to a panel of 15 protection insurers, with availability varying by product and circumstances, and we compare benefits and terms alongside price. We also help with policy reviews and with applications involving medical conditions, unusual occupations or hazardous hobbies.

We charge no advice or arrangement fee; we receive commission from the insurer. CoverLife Insurance is a trading name of CoverTrade Risk Management Ltd, authorised and regulated by the Financial Conduct Authority, firm reference number 1020148. More about CoverLife

Related guides

The questions people usually ask next.

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Common questions

Can foster carers get income protection?+

Yes, many insurers will consider foster carers, but they differ in how they classify fostering as an occupation and in how much of the income they will insure. That makes comparing insurers particularly important.

Why do my tax documents not show all my fostering income?+

Many foster carers pay little or no income tax on fostering income because of qualifying care relief. Tax calculations may therefore show a much lower figure than you actually receive, so insurers may ask for other evidence of your fostering income.

Do insurers count the allowance for the child's costs as my income?+

Insurers differ. Fostering payments are often made up of an allowance intended to cover the child's costs and, in many cases, a fee or reward element paid to you as the carer. Some insurers look only at the fee element, while others take a different approach.

What evidence of fostering income will I need?+

Statements from your fostering service or local authority showing what you have been paid are commonly used, alongside any tax records. Insurers may ask for evidence when you apply and are likely to ask for it if you claim.

Does income protection pay if I have no child placed with me?+

Income protection pays when illness or injury stops you working and you meet the policy's definition of incapacity. It does not pay because a placement ends or there is a gap between placements. How a claim is assessed if you become ill between placements depends on the policy terms.