Each and every year, around 1.4 million people encounter work-related illness in the UK and that’s before we start talking about those illnesses and injuries that occur away from the workplace. When illness or injury occurs, what often accompanies it is an inability to go to work and make a living, whether you’re self-employed or P.A.Y.E.
What’s known as income protection insurance is a financial product that is taken out to provide cover when you’re unable to earn an income due to illness or injury. When considering whether it’s right for you or not, you have to ask yourself the question of whether you’d be able to survive on your statutory sick pay (which lasts for just 28 weeks) (if you get it) and your savings for an extended period if you got seriously ill and were unable to make a living.
So, How Does Income Protection Insurance Work?
Also referred to as ‘permanent health insurance’, income protection insurance is designed to offer long-term financial support when you find yourself incapacitated and unable to work. It ensures that you continue to get financial support until you’re either able to return to work or you retire – whichever comes first.
You’ll typically find that you will have to wait until your sick pay ends before you start receiving payments from an income protection policy or until any other type of insurance you have has stopped paying out. This will depend on the policy you have, but the longer this agreed period is, the lower your insurance premiums are likely to be.
Not to Be Confused With Critical Illness Insurance
Income protection insurance is often confused with critical illness cover, but they are very different in that the latter pays out a one-time lump sum when you get a particular type of serious illness. It’s also easy to confuse it with short-term income protection that only pays out a certain amount, for certain illnesses and usually for a short amount of time (typically 2-5 years).
So, now we know what income protection is – the next and most obvious question then is whether you actually need it or not.
So, Do I Actually Need Income Protection Cover?
The easiest way to answer this question is by asking yourself how you would pay your bills if you got ill. Regardless of whether you have dependents or children, you should really give some serious consideration to getting income protection if you’d struggle to meet your obligations.
Those that most need it would be anyone who has no sick pay in place, such as self-employed people. You also need to consider what cover you already have, so as to make sure that you don’t pay for two types of cover for the same thing – as usually only one will pay out.
Other reasons you might not need income protection include:
● Your employee benefits package covers you for an extended period
● You’re entitled to government benefits that you could survive on
● You have significant savings to support yourself
● You’re near retirement
● You have family that would be willing to support you
● Your partner earns enough for both of you
Whatever You Do – Don’t Leave Important Things Like This to Chance
There’s no doubt that life throws up things we don’t expect from time to time and if one of those things is a serious illness, you need to protect yourself and your family. Income protection isn’t for everyone, but it is for anyone who wants to protect their financial future. Just be sure to check that you’re not covered elsewhere and that the policy you take out covers your precise needs.
At Be Money Savvy, we are dedicated to helping our customers lead more financially prudent lives and these blogs are created to help you better understand the financial products that exist to help you do that. If you would like to know more about us and the comprehensive home and life insurance policies that we offer, head over to our website www.bemoneysavvy.co.uk and take a look around.
Thanks for reading and if you take anything away from doing so, it should be that you really can’t leave important things like this to chance, as it’s ultimately you and your family that might suffer if you do. We’ll see you again soon with more from the home of savvy financial living.