Lauren Monckton No Comments

Using Furlough to understand Income Protection

No-one could have predicted the first half of 2020 and what it would bring, so the notion that you could have been completely prepared for what was to come is difficult to comprehend. I’m guessing that if you could travel back in time and put more insurance policies in place you more than likely would have.

One of the most overlooked types of insurance has typically been income protection. Research conducted by the Financial Conduct Authority shows that only 35% of people have any form of protection insurance in place, and of that 35%, only 4% have any form of income protection.

Two of the most common reasons for this is the lack of understanding around what income protection is, and the belief that you’ll never need it! However, a good way to understand what income protection is, and what it does, is to look at the furlough scheme used by the government in recent  months.

Since March, nearly ten  million UK workers have been placed on furlough, so it’s likely that if not directly impacted yourself, you know someone who has been. The basic premise of furlough is to support workers financially while they’re unable to work due to COVID-19. Albeit that the mechanics, criteria and funding are different, this is basically what income protection does.

What would have happened to all those workers if the furlough scheme hadn’t been introduced?

This is the question you need to ask if yourself and assess your own circumstances if don’t have any income protection in place.

A common response to income protection is ‘it’ll never happen  to me!’, but what 2020 has shown us so far is that nothing can be predicted and it is better to be prepared and protected should the unexpected happen.

Income protection plans normally cover up to 60% of income and protect you if you are unable to work due to sickness, illness or an accident that keeps you off work for a period of time. You can, based on your savings, determine the amount of time before the income protection pays out with deferral periods being normally one, three, six or twelve months. During that period there would be no payments for the income protection.

What if you’re self-employed?

If you’re self-employed you can still get income protection, and in fact it may be even more relevant for you. However, according to research from The Exeter, less  than one in 10 self-employed workers protect their income, and nearly a fifth of self-employed workers have no personal savings to rely on in times of financial uncertainty.

According to the Office for National Statistics, the UK self-employed workforce grew to 5 million by the end of 2019, representing 15.3% of employment, up from 3.2 million in 2000.

With more UK workers embracing self-employment, options within the marketplace have adapted to better serve this growing sector of the workforce, with bespoke policies tailored for the differing requirements of the self-employed.

Contact one of our independent advisers to discuss your protection needs today on 01329 282882, or use contact our Facebook or Contact Us page.

Income Protection plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.

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Business Protection – can you afford not to?

As a small or medium sized business owner, you should be proud to form the backbone of the UK economy. You currently form 99% of the number of UK private sector businesses, and 60% of employment in the private sector is reliant on SME’s like yourselves, making you vital to the UK economy.

Being so vital to the UK economy means as business owners, you are aware of the risks that you may face including changes in the economy, competitors and ongoing profitability. You are also prudent enough to cover some of these risks like premises, machinery, vehicles and computer systems. Yet these are not the necessarily the biggest risks you may face as a business owner.

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Life insurance is just life insurance, right?

As we emerge from the Covid-19 pandemic many things will have changed, they way we work and socialise, and the way we use technology.

As most people have had more time during the lockdown, they have been able to review the features and benefits of the products and services they buy, what are the added value benefits, are they useful and do they enhance the product?

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Additional benefits of General Insurance

Whether you live in a one bedroom flat or a five-bedroom detached house, you’ve worked hard to make your house your home, so it’s important to have the correct protection in place in case something should go wrong.

Though you might believe the unthinkable would never happen to you, what if it did?

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Health Cash Plans

An increasingly popular benefit for employees, health cash plans are a type of insurance policy which pay employees tax free cash back towards everyday health care such as dental treatment, eye tests, glasses, contact lenses and physiotherapy.

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Should your life insurance policy be in trust, and who will benefit from it?

So, you’ve already arranged a life insurance policy, or you may be about to do so. Perhaps you’ve done this to cover a debt such as a mortgage, or to provide a lump sum for your partner or your financial dependents. But should this policy be in trust? Who will get the money and how long will it take?

If you have made a will then it will contain a list of who you wish to receive the benefits of your estate, but before this can be carried out your executors will have to apply for a grant of probate. If you haven’t made a will, any assets will be subject to the Laws of Intestacy which could see them go to the wrong people.

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Income Protection – why wouldn’t you want to protect your income?

Income Protection, also known as IP insurance, can help financially support you if you are unable to work and suffer a loss of earnings as a result of an injury or illness.

When you think about it, the most important skill you possess is being able to work and earn a living to pay for all the nice things in life. Unfortunately, the human body is not indestructible and is prone to getting injured or suffer from various ailments.

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Critical Illness Cover – what does it really do?

Critical Illness Cover is protection that’s designed to pay a lump sum if you’re diagnosed with one of a list of specified critical illnesses. 

Most Critical Illness Cover providers have a list of 40 plus conditions covered, but the big four are Heart Attack, Cancer, Stroke and Multiple Sclerosis (MS). Most companies offer children’s cover as an additional benefit and will pay an amount if any of your children are diagnosed with one of the listed conditions. Sadly, this is one of the biggest claim areas.

It doesn’t matter what happens after the diagnosis, it’s the diagnosis that triggers the claim on Critical Illness Cover (provided you survive more than 28 days after diagnosis). You don’t have to be terminally ill, off work for long periods of time, and you can make a complete recovery.

I’ve been a Financial Adviser for nearly 30 years and for much of this time I’ve been advising people to take out a range of protection insurance policies. For all of this time, I’ve been almost evangelical about the benefit of Critical Illness Cover.

Critical Illness Cover has been around for over 40 years. Most people now know somebody who has benefited from a Critical Illness Cover claim. If you don’t and you’re reading this – well – now you do. Whilst not unique, I’m unusual in that I not only advise on, and arrange critical illness policies for clients, I’ve also claimed on my own.

So what benefit does it really give?

You might just think it’s a lump of money – you can use it to reduce or pay off your mortgage and other debts, provide for additional health care and adapt your home if you need, but it also goes much deeper than that.

I was diagnosed with cancer in 2012. It goes without saying that it’s a pretty uncomfortable conversation that you have with your Consultant at this point. There’s shock, fear and even a bit of panic. The most difficult thing to deal with, in my view, is the uncertainty. Cancer, its treatment and subsequent hopeful recovery is a long road to travel and you ask yourself lots of questions. Will I make a recovery, will I be able to work, how will I react to treatment, if I do go into remission will it come back?

My NHS treatment was superb and with that, brilliant support from family and friends and a bit of luck I have made full recovery. The initial stages were very difficult with an endless round of hospital visits, surgery and chemotherapy which lasted around 6 months. Then you have regular checks and scans, hopefully to confirm that you are still clear. After 5 years, the big day when they tell you that you’re still clear and apart from for the occasional check every 5 years thereafter, they don’t want to see you again.

I made a claim on my Critical Illness Cover the day after I was diagnosed and within a month both policies had paid out.

I was doubly lucky in that I didn’t actually have to have too much time off work. I was able to work knowing that I didn’t have to if I wasn’t up to it. I knew that if I didn’t respond well to treatment that financially I was fairly secure. Believe me when I say that having that safety net is a massive comfort. I was able to concentrate on recovery without financial worries.

When you’re dealing with any critical illness you can count on superb care of the NHS. Hopefully you can rely on help from your family, friends and work colleagues, but in addition you need to be able to focus completely on the job at hand – recovery. To be able to do that you need to be free from financial worry. You need every possible advantage you can get. I know money isn’t everything, but it really does help. That’s the real point behind Critical Illness Cover and I truly believe that my policy helped me get to the stage I am at today.

About Critical Illness policies

Critical Illness Cover has evolved over the years and the modern policy offers flexibility with a much wider range of coverage. These include numerous additional benefits designed to aid recovery including, in some cases, specialist second opinions, access to complementary treatments and psychological support.

In 2017 (the latest full year statistics) 15,962 critical illness claims were paid in the UK with a total value of £1.16 billion paid. 92.2% of all claims made were paid by the insurers. (source: Association of British Insurers Claim Statistics 30/04/2018).

If you have existing policies, they are worth reviewing to make sure that the cover meets your current needs. If you don’t already have cover you can speak to an Independent Financial Adviser and see what’s available. It doesn’t need to break the bank.

If you’re ever in the unfortunate position that you need to claim on your Critical Illness Cover, you’ll think it’s the best money you’ve ever spent.

Critical Illness plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. Plans may not cover all the definitions of a critical illness. The definitions vary between product providers and will be described within the Key Features and policy documentation if you proceed with the plan.

For more information on Critical Illness Cover, or any other protection needs, contact Simon Ereira at Temple Wealth Management on 01305 213150 or simon.ereira@templewealth.co.uk