Income Protection Pays The Bills When You Cannot

Ok, so we know why people insure their car - it's the law, similarly if you have a mortgage it is compulsory to insure the property

Every other insurance is in theory optional, with many people choosing cover for pets, mobile phone and their household appliances either by their own choice, thinking it was compulsory or worse not even knowing what they are paying for each month!

However, very few people insure the very thing without which a pet, mobile phone or many household appliances would become a luxury, I am talking about protecting your income, salary, wage, whatever you want to call it, this is what pays the bills for most of us.

-What would happen if due to long term illness, injury or accident your income stopped? Take a look at your monthly net pay and then ask how long you might survive without it…..

-If you are really lucky your employer will pay you for a period, maybe even full pay for the first 6 months of illness but what happens after that….

-Possibly you have savings, but how long would these last even in just maintaining your “essential” monthly outgoings….

– “My family would help” is another common response, maybe, but how long could this be sustained before tensions arise….

Research by Legal & General in 2017 shows that employees on average have a 32 day deadline before money starts to run out.

Some people say that they could survive on a partners’ salary alone – either your partner loves his/her job and works for this reason alone, or you currently save all of their wages each month – are either of these scenarios realistic?

One of the main reasons for clients not taking cover is because there is a belief that the state would help them. But is this true? Not really, as Statutory Sick Pay is £92.95 per week (£403 per month) for a maximum period of 28 weeks. After that, any future state benefits are means tested but are hardly generous, and if anything, likely to reduce over the longer term as the Government purse strings are stretched by other demands such as the NHS, education etc.

Income protection cover is an obvious solution, which can be tailored to your individual circumstances:

-To begin after any employer’s sick pay ceases.

-To end in line with a mortgage being fully repaid or children finishing education.

-To increase in line with inflation.

-To be underwritten by the insurer at the time of application so that you know exactly what is covered and any exclusions.

-Provide an income in line with current net salary for the lifetime of the policy.

A good way to determine how much cover is required is to divide a recent bank statement into 3 categories;

-Monthly payments which are absolutely necessary for survival, eg mortgage, food and bills.

-Those outgoings that you would like to keep, eg gym membership, Sky etc.

-Those that you can do without. This helps to determine how much cover you ought to have in place to maintain your home and lifestyle.

The average age of an income protection claim is age 42 (Legal & General claims payment record 2017). That’s earlier than most people think. Ah, I hear you say “but these policies don’t pay out when you need them”. This is a myth and recent statistics available from Legal & General for 2017 are as follows;

-94.8% of income protection claims paid out with those which weren’t successful usually due to existing illnesses not being declared when applying for the policy.

So taking things back to reality, pet insurance may well prove to be essential when your beloved cat, dog etc. is ill, but who feeds him / her if you are too ill to afford to?

Speak to us today about how you can improve your financial security. What have you got to lose?

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