Why you should consider income protection.
If sickness or illness prevented you from working, how would you cope financially?
The uncertainty and stress caused by sudden income loss is significant. Income protection is an important financial safety net that is designed to protect people and their families during challenging and unforeseen times. While it is hoped that you never have to make a claim, the reassurance of a policy offers peace of mind that if something happened, you would be covered.
In this article, we discuss the importance of income protection, explaining why you should consider taking out a policy. For expert advice on income protection and financial management, contact us at Duke Godley.
What is income protection?
If you become unable to work due to illness or injury, income protection pays you a portion of your income for a set time. It strives to act as a safety net for people who experience an unexpected loss of income, allowing them to recover without facing major financial stress.
While cover differs across policies, most companies do not offer income protection for involuntary redundancies. You will also not receive income protection if you are dismissed or quit your job.
Why do I need it?
Consider these questions:
- Could I pay my bills if my income suddenly stopped?
- Am I entitled to sick pay?
- Do I have a partner’s income for support or am I a single-income household?
- Would my family have enough money if my income was stopped?
You can learn more about Income Protection here.
The impact of Covid-19 on income protection
The Coronavirus pandemic triggered mass job losses across the UK, with the unemployment rate rising to approximately 4.5% according to the Office for National Statistics. These unprecedented times caused people of all ages and career stages to recognise the damage of sudden income loss.
Interest in income protection has skyrocketed in light of this, with a three to four-fold increase in inquiries compared to pre-pandemic figures. Now more than ever, people understand the importance of protecting their income.
Your income protection questions answered.
I would just rely on state benefits. Why would I need income protection?
The Employment and Support Allowance pays up to £58.90 a week if you are under the age of 25, or up to £74.35 a week if you are over the age of 25. Would this be enough to support your family and pay your expenses?
How much does it cost?
While costs are subject to medical underwriting and policy features, the average cost of an income protection insurance policy is between £50 to £80 a month.
How often do claims get denied?
According to figures from the Association of British Insurers (ABI) and Group Risk Development (GRiD), 98.3% of income protection claims were paid out in 2019.
What health conditions justify an income protection insurance claim?
In 2019, musculoskeletal injuries were the leading cause of individual income protection claims, followed by mental health, then cancer.
What’s the difference between life insurance and income protection?
Life insurance is a payout your family receives if you pass away. Income protection is claimed if illness or injury stops you from attending work.
Income protection policy providers
There are various providers of income protection in the UK. When choosing an income protection policy, remember to ask questions about the level of cover, costs and hidden fees, payout details and policy duration. Here are some of the leading income protection providers:
- Liverpool Victoria
- British Friendly
- Exeter Family Friendly
Need help with income protection or financial planning? Contact us.
Income protection can significantly reduce financial stress if sudden injury or illness affected your ability to work. Proactively plan your financial future with Duke Godley.
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