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.

If you are unlucky enough to have an accident, or suffer from an illness that prevents you from working for any time up to a year or longer, how will you cope financially continuing to pay for all the bills, mortgage and other ongoing costs that life throws at you?

Why wouldn’t you want to protect yourself against this situation with Income Protection?

If you are fortunate enough to have a generous employer with good sickness benefits, who would continue paying you your basic wage for 6 months or so, then that’s good but the majority of employers are not in the position to do that.

What about State benefits?

If you don’t have any Income Protection and you do become injured or ill, before you know it your income whilst you’re unable to work would reduce to the current Statutory Sick Pay (SSP) rate of £94.25 per week, paid for the first 28 weeks that you are not able to work. Beyond this you may qualify for Employment and Support Allowance (ESA).

For the self-employed the situation is even more worrying. If you are one of the many millions that work for themselves and you become ill or disabled and are unable to work, if you don’t have any income protection in place you will have to look at State benefits such as SSP, or you could qualify for ESA. This would pay £73.10 per week for the first 13 weeks. At this point it would be reviewed and would either remain the same or increase to £100.75 per week if you are unable to return to work.

What this all points to is that if you simply rely on the State when you are unable to work, due to sickness or disability, you will suffer a huge reduction in your income. This can quickly begin to cause major problems paying for even your basic bills, let alone continuing to have the same lifestyle as before.

This is where Income Protection comes into its own

For an amount suited to your budget, you can have an income paid to you after you have been sick or disabled and unable to work for a period of time, known as the deferred period. This is normally for 8, 13, 26 or 52 weeks matching your individual needs.

An income of up to 60% of your previous earnings can be covered which means it would at least help pay for your essential costs.

If need be, the Income Protection plan would continue to be paid until you either went back to work or until your chosen retirement age. Potentially, this could add up to many thousands of pounds being paid to you over a long period of time, if necessary, which would not be available to you without having this kind of Income Protection plan.

It seems strange that most people will buy pet insurance before they even consider Income Protection.

If you had a machine producing money for you, day in day out, you would make sure it was insured. Well, that machine is you but, surprisingly, you never think of protecting this valuable asset against a breakdown or malfunction although you wouldn’t think twice about not protecting your car, for example.

Some relevant figures to leave you with:

• £21,000 is the average annual shortfall for someone unable to work
• The average UK employee could be on the breadline in just 32 days
• 30% of UK employees have no financial back up
• In 2016 there were 15 times as many people who needed income as needed life cover – 58,768 deaths compared to 866,667 ESA claims
• For every death in 2016 there were 20 life policies sold as opposed to for every Income Protection policy sold 7 people claimed ESA

(sourced from Swiss Re, Term and Health Watch 2017, ONS 2017, DWP 2017)

So as can be seen, there is a real chance that you may be one of the unlucky people who may be unable to work due to sickness or disability and, potentially, struggle to cope with it all, financially.

The simple solution is to have a chat with us at Temple Wealth. We can help you overcome this financially crippling scenario and put together an Income Protection plan suited to your needs and budget.

The definition of illnesses or incapacity may vary between product providers and any claim is based on your actual evidenced income. Premiums must be kept up to date or cover will cease, some policies have no cash in value.