According to Which? it’s “the one protection product every working UK adult should consider buying” – so what exactly is income protection and is it right for you?
Who is income protection for?
The simple answer is: anyone. We all like to think that we’ll be healthy for the foreseeable future and able to work until we retire, but sadly illness or injury which prevent us from working can surprise us in the most unlikely times and circumstances.
Income protection is there for the times when you find yourself unable to work through injury or illness, so you can afford to keep paying bills and stay afloat.
Ask yourself these questions: if something happened to you and you couldn’t work for several weeks, months or years, do you have the savings or income to pay your bills and other expenses? If you were unwell, would you really want to be worrying about money too? If your answers are no, it’s worth looking more into income protection.
The income gamble
Considering how vital it is for us all to pay our rent or mortgage, keep up with bills and buy food and other essentials, you might be surprised that just 9% of people have some form of income protection.1 Quite a low percentage considering around 1 million people each year find themselves unable to work due to serious illness or injury.2
This compares with 41% who have life insurance and 16% who have private medical insurance.1
In fact, less than 25% of people say protecting their income is essential, compared with 74% who say it’s essential to have broadband access!1
How does income protection work?
Not to be confused with critical illness insurance which pays out a lump sum if you are diagnosed with a serious illness, income protection ensures that you continue to receive a regular income in the event you find yourself unable to work due to illness or injury. It therefore provides cover not just for the very serious health issues covered by critical illness but also the many other health issues that may prevent an individual from being unable to work for a period.
Policies can differ in the length of support provided from short term polices that provide cover for one or two years only, up to the cover provided by Income Protection Plus which will provide you with an income until you return to work or reach 65 years (whichever happens first)
Whilst you might be eligible for Statutory Sick Pay (SSP), the rate for this is only £89.35 a week and ends after 28 weeks – an income protection plan is long-term and will continue to pay out until you return to work or retire. You are still able to claim on your income protection plan alongside employer-paid statutory sick pay.
What options are available?
Sovereign Assured Partners, which is a wholly owned subsidiary of Sovereign Health Care, has teamed up with PG Mutual to provide Income Protection Plus (IPP), a tailored and cost-effective solution. There are two cover options available. Premium level cover will pay 100% of income benefit throughout the term of a claim. Standard level cover will pay 100% for the first two years, reducing to 50% in year three and then 30% for as long as a policyholder remains unable to work.
The IPP plan comes with an added bonus – PG Mutual returns profits to its members, meaning that the plan builds up an investment element for the future, whether they have claimed on their plan or not.
2 Money Advice Service https://www.moneyadviceservice.org.uk/en/articles/do-you-need-income-protection-insurance