Income Protection - Do I Need It?

Income Protection - Do I Need It?

Let’s start with a quick question? How do you manage day-to-day life financially? Many people will be quite comfortable with their position. Now let’s ask a slightly different question. How would you manage day-to-day life without a stream of regular income? For most people this would ring alarm bells.

According to the Association of British Insurers (ABI) approximately one million people in the UK find themselves unable to work due to serious illness. Around 40% of working families would experience an income fall of more than half without the safety net of any insurance.  This is where income protection insurance comes in.

In the event that you do fall ill or get seriously injured what plans do you have in place. Maybe you have an emergency saving pot or maybe you have investments which you could use to fund day-to-day financial matters.

Income protection does what it says on the tin. Protects your income! It ensures that you will continue to receive a regular income until you can return to work or in extreme cases until you retire. It will substitute your missing income and make sure that you can cover your living costs and bills minimising your chances of running into debt. 

This should not be mistaken for critical illness cover which pays out a one-off lump sum if you have a specific illness.

Depending on the type of policy you take out:
·         It replaces part of your income
·         There is often a waiting period before the payment start

The longer you wait the lower the monthly premiums.
·         It covers most illness that leave you unable to work
·         You can claim as many time as you need to while the policy lasts.

The cost of a policy depends on many factors such as:
·         Age
·         Job
·         History of smoking
·         Percentage of income you wish to cover
·         Waiting period before policy pays out
·         Range of illness/injuries covered
·         Current health/family health

Do you need it? Maybe you have sick pay to fall back on or family to support you. Maybe you have children or dependants to provide for. All of these things need to be carefully thought about and if you feel that illness or injury would prevent you from paying the bills, you should definitely consider income protection.