Why Have Income Protection Insurance?

By Vicki Coleman

I’m young. I’m healthy. I get sick pay from my employer…

There are all sorts of reasons why you might decide you don’t need income protection. But have you thought about the consequences of not having it?

Let’s look at those objections in more detail:

-        Age: Statistically, a younger person is less likely to need a long period of time off work. But there are no hard and fast rules about when you may get ill.

-        Fitness: However healthy you feel today, there’s no guarantee you’ll feel the same tomorrow.

-        Employee benefits: While you might get paid sick leave, payments could only last a few weeks and may not cover all your outgoings. If you only get statutory sick pay (SSP), you’ll get just £99.35 a week for up to 28 weeks.

Why take out income protection?

The reality is, accidents and illness can happen to anyone at any age, fitness level or situation.

There’s no way of knowing what lies ahead. But there is a way to be prepared for whatever the future holds: income protection.

Income protection can pay out for physical health conditions – such as back pain, cancer or a stroke. It also covers you for mental health-related issues – such as depression, anxiety and stress.

It is designed to help cover your living costs if you are off work for any length of time due to illness or injury. Income protection means you don’t have to worry about paying your mortgage/rent, household bills, childcare costs or car loan repayments.

It can also help you maintain your normal lifestyle. You’d be surprised how quickly the cost of clothes and school trips mount up – and that’s before you add things like holidays or meals out.

What are the benefits of income protection?

Research shows that just 7% of UK adults currently have income protection or critical illness cover.

But perhaps if more of us understood the benefits, uptake would increase. Here’s how income protection can benefit you. For instance, if you:

-        Have limited savings: A recent survey revealed that a quarter of UK adults have less than £100 in savings. Not only does that leave people vulnerable to rising or unexpected bills, it could also cause serious consequences if they become ill and unable to work.

-        Have a family: When you have a partner and children, it’s not just you who relies on your salary. If you’re unable to work, there could be knock-on effects for the whole family.

-        Are single: If you don’t have dependents, you’re not in the clear. Living by yourself means you’re responsible for all household expenses. This puts you in a tricky financial situation if you’re suddenly no longer earning.

-        Are in debt: If you have taken out a loan, it is important to keep up to date with repayments. Having income protection can help you cover those monthly payments and help you avoid getting into more debt.

-        Are self-employed: When you don’t get employee perks such as holiday or sick pay, you need a financial back-up plan in case you become ill and cannot work

What other options are available?

With the cost of living crisis, we’re all having to think twice about our spending.

Whether or not you decide to take out income protection is up to you. However, the more you know about your options, the more able you will be to make the right decision.

Looking for an alternative to income protection cover? There are different options you might want to consider.

Ever considered life insurance? It pays a lump sum to your loved ones if you die during the term of your cover. Typically used to pay any outstanding debt (e.g. your mortgage), it is cheaper than income protection.

Or what about critical illness cover? Again, cheaper than income protection, it covers you for long-term, serious conditions. Unlike income protection, which gives you regular monthly payments, critical illness pays out a tax-free lump sum if you’re diagnosed with a defined condition.

Finally, there’s private medical insurance (PMI). Not strictly an alternative, PMI is designed to help you get the medical treatment you need, when you need it. With no upper age limit or medical examination required, it’s a more appealing option for some.

How can income protection help you?

When you really start to look at the benefits of having income protection compared to not having it, the argument in favour becomes pretty compelling.

Here’s a round-up of why income protection could be right for you:

-        A long-term illness can have significant impact on your life (and livelihood)

-        Employer sick pay may only last a few weeks, then you’re reliant on SSP

-        You can get income protection if you’re self-employed (restrictions may apply)

-        Premiums can be tailored to suit your budget

To compare free income protection quotes from leading providers, click here.