Why is income protection insurance important

Why is income protection important

Why is income protection insurance important?

No one likes to think that anything unhealthy can happen to them, however, if you couldn’t work because of a significant health problem or accident, how would you manage financially?

Could you survive on savings or sickness pay from work? If not, you’ll want another way to keep paying the bills – and you may wish to think about income protection insurance to fall back on should the worst happen.

Although, 10.8 million UK households could be in danger of their income falling by a minimum of a 3rd if the main wage earner stopped working because of sickness or an accident [1] let’s look at 3 groups according to a recent LV survey most at risk.

The Self Employed

Income protection insurance for self employed

The self-employed in the UK consists of 4.8 million workers contributing £255 billion to the UK economy, off those surveyed:

  • 3 in 10 (28%) worry about not being able to work.
  • Nearly 2 million are unable to save any money each month.
  • A staggering 4 in 10 believe they are not eligible for income protection insurance.

 Generation Debt

income insurance broker

Generation debt or known as late millennials consist of 24 – 35-year-old and typically rent, there top reason for debt are:

  • repaying student loans (40%) and credit card bills 32%.
  • 4 in 10 don’t save any money each month.
  • more than 4 in 10 aren’t confident in their ability to handle a personal financial crisis.

Middle Britain

Income protection insurance


Consisting of 13 million typically working families with children and income ranging from 25k and 45k they are generally skeptical about income protection although:

  • 75% said they spend the majority of income on household bills.
  • 3 in 5 falls below the recommended MAS saving recommendations.
  • 4 in 10 with credit card debt.

You might assume this might not happen to you (and, of course, we tend to hope it doesn’t), however, it’s vital to recognise that nobody is immune to the financial impact that would occur due to ill health and accidents.

What is Income Protection Insurance?

what is income protection insurance

Providing a regular monthly payment into your household is a financial lifeline, income protection insurance is a long-term or short-term insurance policy that will provide you with a monthly payment if you can’t work as a result of sickness or accidents that can keep you from working and generally pays out till you return to work, or until you retire, die or the maturity of the policy – whichever is sooner.

What are the benefits of income protection insurance?

  • It replaces part of your income if you can’t work because you become ill or disabled.
  • It pays out until you recover and can start working, or up to you retire, die or the end of the policy term – whichever is sooner.
  • There’s a waiting period before the payments start, that you agree when you set up the plan, this can be 1 day. 1 week, 1 month, 2 months, 3 months or 6 – 12 months, for those with employer sickness pay arrangements in place, you set your cover to begin when your sickness pay ends. The longer you wait, the lower the monthly payments.
  • It covers most illnesses that leave you unable to work, either in the short or long term (depending on the sort of policy and its definition of incapacity)
  • You can claim as many times as you need to while the policy lasts.

What about Employment Support Allowance?

You can get financial and work-related support through Employment and Support Allowance (ESA). You’ll normally get the assessment rate for 13 weeks after your claim. This will be:

  • up to £57.90 a week if you’re aged under 25
  • up to £73.10 a week if you’re aged 25 or over

After that, if you’re entitled to ESA, you’ll be placed in one of 2 groups and will receive:

  • up to £73.10 a week if you’re in the work-related activity group
  • up to £109.65 a week if you’re in the support group

You might get more ESA in the work-related activity group if you applied before 3 April 2017.

  • If you’re in the support group and on income-related ESA, you’re also entitled to the enhanced disability premium at £15.90 a week.
  • You may also qualify for the severe disability premium at £62.45 per week.
  • If the assessment takes longer than 13 weeks your benefit will be backdated to the 14th week of the claim.

How much does income protection insurance cost?

How much you pay monthly can depend upon the policy and your circumstances, and also the price of a policy can vary based on:

  • Your age
  • Whether you smoke or have previously smoked
  • Your health (your current health, your weight, your family medical history)
  • Your occupation
  • The percentage of income you’d like to replace

Should you consider income protection insurance? 

With income protection insurance, everything depends on getting the right policy, and it doesn’t matter whether or not you have children or other dependants – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.

For more information or to discuss your requirements, please contact us today – we look forward to hearing from you.

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