Income Protection – Can I afford NOT to have it?
Most people are happy to insure their cars, their homes, and the things they have in them such as TVs, laptops, etc. They’ll also happily insure their pets.
But they often forget to insure the thing that pays for everything e.g. mortgage, pension provision, parenting or educational costs and every other living expense — which is their income.
So, unless you work just for fun and not the money, I would suggest that Income Protection is the first and most important policy that everyone should have.
We all hear news of a friend or relative who:
- Is off work for a few months, or
- Has been diagnosed with a serious illness (for example: cancer, heart attack, stroke etc.)
- Has unexpectedly died
It is shocking and all the more difficult to imagine it happening to us, but ask yourself the question, if any of these events did happen, how would you cope?
Using your date of birth, gender and smoker status, one insurer has a tool to give you an idea of the chances of one of the above events happening to you before your planned retirement age. The calculation uses population and industry statistics with your results being shown as a percentage. Why not give it a go? Simply visit: www.riskreality.co.uk/vita
In terms of all protection products, if I had to rank them in order, I would suggest Income Protection is the most important of all, on the basis that you’re six times more likely to suffer long-term incapacity and be unable to work, than you are to pass away before the age of 65.
On their website, Which? (the respected consumer champion) state: ‘The one protection policy every working adult in the UK should consider is the very one most of us don’t have – income protection.’
What is Income Protection? Income Protection is designed to pay out a monthly non-taxable Benefit if you’re unable to work for any reason whether it be due to an Accident, Illness, Sickness, or Injury; plus you have the option of Unemployment Cover which can pay the monthly benefit if you were unfortunate enough to be made redundant or in some cases even dismissed.
The State’s Contribution: Most people can’t rely on the State alone in the event of long-term sickness or unemployment, considering:
- Statutory Sick Pay can be just £88.45 per week (£383 a month) – paid for up to 28 weeks; and
- Jobseeker’s Allowance is a maximum of £73.10 per week (£317 a month).
Source: GOV.UK – Tax Year 2015/16
The key benefits of having the cover in place is to help ensure you can maintain your lifestyle, as well other family household outgoings like; mortgage payments, parenting, educational costs, council tax, utility bills etc.
It can be confusing when researching or comparing different policies, unless you are fully aware of each policy’s product features/limitations. With different terminologies like Claim Period & Deferred Period, as well as varying exclusions or percentage salary entitlements, it’s very important to get advice from the experts.
Paul Reed – Protection Specialist and Co-founder of Vita – an independent, national award winning, insurance brokerage in Cardiff.