When it comes to insurance, we’re more likely to protect our pets than our income. Here’s why it’s important to have some income protection in place.
What is income protection?
Income protection pays out a percentage of your monthly income if you are unable to work due to illness, an accident or disability. It gives you a buffer between finding yourself without an income, paying the bills and protecting your family’s security. Building an emergency fund (which covers around three months’ worth of bills and essentials) is a good start to give you some financial back-up, but income protection insurance can also provide peace of mind.
How does income protection work?
Income protection is an insurance policy, so you pay a monthly or annual premium for it like any other type of insurance. If you can’t work because of sickness, disability or other reasons (depending on your policy criteria), you will receive a regular income until you either return to paid work, retire, pass away or the policy term comes to an end. We can help you determine how much coverage you’ll need.
How much does income protection pay?
It could be anything from 60% to 65% of your pre-tax income, and the regular payments (which are tax free) will start after a pre-agreed waiting period, which could be weeks or months. You’ll pay more in premiums if the waiting period is shorter and the percentage of your income is larger. This type of protection is different to life insurance or critical illness cover, both of which do not pay regular amounts but instead provide one[1]off lump sums in the event of your death or the diagnosis of a critical illness.
Do you need income protection?
With the rise in the cost of living and cost of borrowing right now, many people are worried about paying the bills should anything happen that leaves them unable to work. Recent surveys have shown that the average UK family doesn’t have enough in savings to be financially secure for long if they’re no longer receiving an income.
That’s where income protection can give you some financial resilience, especially if your workplace does not provide statutory sick pay (or only starts to pay out after a period of several months). Your adviser can help you navigate the income protection policies that could best suit you and your needs, weighing up how much your premiums might be with the amount of cover you’re after.
As with any insurance policy to do with your life and health, things like your age, health, occupation and other factors (like how much of your income you would like to receive, and how soon you would like payments to start) will be considered when your premium is calculated.
We can guide you through what type of policy works best for you, helping you find value for money as well as some peace of mind knowing your income is protected.
Peace of mind for the self-employed
Sarah is self-employed and she approached her financial adviser for some advice. As a single mum, she worried that her emergency savings fund wouldn’t be enough to cover the rent or bills if she found herself unable to work. Sarah’s financial adviser found her an income protection plan with an affordable monthly premium that covers 65% of her earnings.
Contact Debbie Bell on 01707 872 000 or email Debbie.bell@kings-group.net for more information and advice.
