Why You Should Consider Income Protection [AD]
2020 is drawing to a close and what a bizarre year it’s been. It’s taught us that no one is invincible, health is wealth and that life is truly unpredictable! Going into 2021, we should be thinking about how best we can protect ourselves going forward – and I don’t mean the imminent COVID-19 vaccine.
I am actually talking about insurance – income protection insurance to be more specific. Income protection is a type of life insurance that is basically designed to cover a percentage of your salary (usually around 50-70%) if you become too ill or injured to work. Even if you never end up making a claim, income protection is peace of mind that you’re doing all you can to keep you and your family safe.
How does income protection work?
Let’s talk a little more about how income protection works. If you’re sick and injured, income protection allows you to pay your bills and provide for your family by providing regular payments to replace part of your income. It continues paying out regularly until you can either go back to work, until the policy ends, or you retire or pass away. You can also claim more than once on a single policy, which is really handy, and where state benefits can and do change in line with government policy, this cover is a contract and a promise to you that won’t change.
If you are employed, you might be eligible to receive Statutory Sick Pay (SSP) from your employer. This is great but at £95.85 a week, it might not be enough to get you by. If you’re self-employed, you might not have any safety net, aside from perhaps government benefits. This makes income protection all the more important. You can take out an individual policy rather than a business one, but you need to ascertain on what basis the insurer will payout.
Why is it so important for parents?
If you have any financial responsibilities and/or someone that depends on you, income protection is important. It takes on a whole new meaning when you have children, however. When you become a parent, you feel the weight of responsibility for the new bundle of joy in your life. You want to protect them in every way possible.
If you become ill or injured, and you can’t pay your mortgage and bills, what would this mean for your family? Would you need to sell the home and move in with family? Would you be able to afford to clothe and feed your little ones? You may also need to pay out for healthcare or specialist equipment to care for you (depending on your injury or illness).
Is income protection expensive?
Of course, having a family isn’t cheap. There’s always something to be paid for. Can you really afford yet another outgoing? Well, income protection is actually pretty affordable. However, the amount you pay per month depends on your own individual circumstances and how much cover you choose.
Premium prices are based on your age, your marital status, whether you smoke or have previously smoked. In addition, your lifestyle (such as whether you have any high-risk hobbies such as extreme sports), your job, your health (current health, your weight, and your family medical history). You decide the deferral period and how much income you’d like to receive each month.
When choosing your amount of cover, you’ll probably want enough to at least cover the mortgage (or rent repayments) and bills at least. It’s also important to consider day-to-day living costs. As lockdown has taught us, you’ll probably end up spending more money on food. Especially if you’re at home all the time.
If you’re self-employed especially, it’s a good idea to factor income protection in as part of your business plan. Even if you’re employed, look after you and your family and ensure you have some sort of protection. If the pandemic has taught us anything financially, it’s that having something to fall back on should never be underestimated. It’s always worth investing in the financial safety of your family.