Hartsfield Financial Services

Why everyone should think about income protection insurance

January 18, 2016 12:30 pm Published by

Income protection insurance is a bit like wearing a cycle helmet. You can cycle for miles and miles, with clear roads, nice dry weather and you wonder what the point of the headgear is. Then you cycle around a corner, hit a pothole, and tumble over the handlebars. If it hadn’t been for the cycle helmet, then the scratched knee might well have been accompanied by a serious head injury.

In the same way, having income protection insurance may seem unnecessary, but if one day you hit that ‘pothole’ – in other words, you fall ill or have an injury which means you can’t work – you’ll be very glad of it.

Income protection insurance will pay out in tax-free monthly instalments, which should make up for the income you are no longer receiving.

For the self-employed, income protection insurance is particularly attractive because these people will have no support from an employer.

So what is the difference between income protection insurance and those two better known policies, life insurance and critical illness cover?


Income protection insurance, life insurance, critical illness cover

There are key differences. Firstly, you determine the amount and duration of cover you want. Secondly, it is up to you when payments start – you can defer. Finally, income protection policies will generally pay out more than once, unlike life insurance (for obvious reasons) and critical illness cover. These features make income protection insurance very flexible.

Interestingly, the consumer organisation Which? found that 41% of people had life insurance, whereas just 9% had income protection, and yet statistically we are more likely to have to leave work due to ill health or injury.

According to the Office of National Statistics, 131 million days were lost due to sickness absences in the UK in 2013, down from 178 million days in 1993. Great that there has been a decrease, but small comfort if you are one of those affected.

A report by Legal & General reveals that the average household in the UK has a ‘deadline to the breadline’ of 29 days. For working age families it’s just 14 days. If you think about it, that means within four weeks of a family individual losing their usual source of income, the average UK household will be reliant upon state benefits and friends and family alone for financial support.

So perhaps the time has come to stop thinking of income protection as a cycle helmet, but as a vital piece of equipment, to protect you and your family.

For more information on how to protect you and your family please get in touch with Hartsfield team

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This post was written by Melanie Dolphin

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