Although income protection may be seen as something that is only needed for those in the later-stages of life, recent statistics from healthcare and protection insurer The Exeter, show this to be untrue.
What is income protection?
Income protection protects you and your family if a physical condition stops you from being able to work. It also covers ill mental health and in fact, according to the Association of British Insurers, in 2017 mental health was the most common cause of claim on income protection policies in the UK.
Why should you consider it?
When buying a house
Income protection cover provides monthly replacement income if someone is unable to work due to a long-term illness or injury. A critical illness policy, on the other hand, would pay out a on-off lump sum payment if there is a diagnosis of one of the many illnesses covered by the policy. Either of these pay outs could provide security against mortgage payments that would otherwise be in jeopardy.
As well as providing financial benefit, most income protection policies will also provide quick access to treatments such as counselling or physiotherapy to help recovery and to, ideally, get people back to work. In a recent Zurich report, one in eight people asked admitted they would need to sell their home if they lost their income, one in six reported having no disposable income and a quarter had no savings. The report also showed that despite more than half of UK adults having had unplanned leave from work including sickness or injury, they had no financial provision in place in case it happened again.
If you’re renting, the same principle applies that if you’re struck with illness or injury, you’ll need protection to make your rental and bill payments
When Getting married
Whether you’re trying the knot or cohabiting as married, it’s important to think about where partners are dependent on each other for splitting the outgoings. If one partner were to be hit by illness, having a security blanket in the form of income protection could mean the difference between staying in their home or having to sell up and move.
Although it is far from pleasant thinking about it, the financial impact of the death of a partner should also be considered. Having a life insurance policy could lessen the horrific blow to the remaining partner, if they didn’t have to think about losing their home as well as their loved one.
According to Zurich, 2.4 million families across the UK – or 73% – are cohabiting, yet do not have life insurance. This compares with 56% of married couples living without cover.
When Having a child
Some critical illness policies also include children’s cover as an additional feature and will pay out up to around £25k if they are affected by a range of illnesses covered by the policy. This can help families with any financial impact such as having to take time off work or help pay towards treatments or any changes that have to be made to the home.
