Do you need income protection?

“Each year one million people suddenly find themselves unable to work due to serious illness or injury. 10.8 million households, more than 60% of working families, would see their income fall by more than one third if the main earner had to stop work due to ill health, and they have no insurance to give them a financial safety net if this happens”. (Quote ABI.org.uk 2017)

• Could you afford to maintain your standard of living if you were out of work due to injury or illness?

• Does your employer provide you with adequate sick pay arrangements to ensure you can meet your financial commitments when you are off work due to injury or illness long-term?

• If you have no sick pay arrangements in place, could you afford to live off the statutory sick pay of £92.05 per week (2018/19) which is paid to you via your employer for only 28 weeks?

These are some of the questions you should ask yourself and if the answer to any of them is no, you should consider speaking to a financial adviser about how individual income protection insurance can provide you with a replacement income and above all peace of mind.

What is income protection insurance?

Income protection insurance is a long term insurance policy that pays out if you are unable to work due to injury or illness. It will continue to pay out until retirement, death or your return to work.

Income insurance is usually taken out to cover typically 50% to 70% of your earnings; this is then paid to you free from tax.

A deferral period is normally applied before the policy will start paying out say for example 3, 6 or 12 months depending on how long you will be paid when off sick by way of sick pay from your employer. The plan will continue to supply you an income, if you are unable to work due to injury or illness. Generally, the longer the deferral period, the lower your premiums will be.

How much does income insurance cost?

How much you pay in premiums each month will depend on the policy and your personal circumstances.

The following factors would be taken into consideration:

– Age
– Whether you smoke or have previously smoked
– The percentage of your income you would like to cover
– The deferral period chosen
– Your current health and lifestyle

The job you do also plays a major part in determining the cost of cover. Many insurers put different occupations into risk categories. For example, due the nature of the work involved and the risks, an administration clerk would be considered low risk compared to a construction worker who would be classed as high risk, and this would be reflected in the premium paid.

Many people think they only need income protection if they have a family or dependents, however, if illness or injury could stop you from paying your bills, you should consider putting in place an income protection policy.
At Norfolk and Suffolk Chartered Financial Planners, we can advise clients on all their protection needs and to arrange an initial meeting at our expense to discuss your requirements please contact us on 01502 501922.

This article aims to supply general information and it is not intended to constitute advice. Every effort is made to ensure that the information referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek specific advice.