Apart from those who already have income protection, for most people their worst fear about not working – whether that’s due to illness or accident – is the loss of income.
If something like this happens, almost the first question is “how will I pay the mortgage, do the food shop, pay the school fees?” Your next thought might be looking at solutions. You might think: “I’ll sell the house, or claim benefits, or use my savings”. All good ideas, but they are all have a downside.
The solution is planning ahead and taking out some form of income protection. But you’re financial planners, we hear you cry, you would say that! So let us make the case for income protection and bust a few myths at the same time.
What is income protection?
Income protection is a policy which pays out in the event that you are unable to work due to illness or accident. It will usually pay out in tax-free monthly instalments, which should make up for the income you are no longer receiving.
Self-employed income protection is particularly attractive if you are solely dependent on yourself for your income, because you will have no support from an employer.
If you are employed, you can also take out income protection insurance against the possibility of redundancy.
Income protection – busting the myths
- I can’t afford income protection. Actually, premiums are cheaper than you think and may be just a few pounds a month. The Hartsfield team will look at your personal circumstances and then advise you on a policy to take out, according to the level of cover you need.
- I already have life insurance. Great that you have this but this only pays out if you die, not if you cannot work. Statistically, you are far more likely to acquire a long-term medical condition than you are to die. In fact, every year one million workers in the UK unexpectedly find themselves unable to work because of injury or illness, according to the Association of British Insurers .
- I have savings. Again, that’s great, but they won’t last indefinitely and they may not be sufficient to meet you lifestyle needs.
- I’ll claim benefits. Don’t expect the state to replace your income if something goes wrong. Welfare benefits range from around £70 a week to just over £100 a week.
- I’m entitled to sick leave. If you are an employee, you can take paid sick leave but this is time-limited. If you are ill for more than four weeks you are classed as long-term sick and your employer can consider dismissing you.
- I’ll sell my house. This isn’t a quick fix. Houses can take months to sell and, as with savings, the profit you make from the house sale is finite.
Income protection quote
We hope we’ve made the case for income protection. Through independent and thorough research into the various options available and your current circumstances we can recommend an appropriately structured, cost efficient income protection policy that will replace your income in the event of accident or illness.
Get an income protection quote quickly, easily and with no obligation from the Hartsfield team. Complete a few details here (which takes less than 60 seconds) and compare quotes from leading insurers.
Categorised in: IFAs
This post was written by Paul Verwoert