Take cover... you never know what will happen
sickness and unemployment (ASU) policies, which tends to only pay out for one or two years, and long-term, which provides a regular income if you are unable to work due to illness or disability, lasting until you are well enough to return to work, retire, die, or the end of the policy’s term is reached, whichever is the sooner.
Policies are designed to protect a percentage of your gross salary taking into account the state benefit you would receive.
There is often a wait before a claim payment starts – this is called a deferred period. Generally it is set up to begin after your sick pay ends or after any other insurance stops covering you.
The cost of income protection cover can vary, depending on your age, occupation, required benefit, deferred period, payment period, your general state of health and in particular whether you smoke or not.
You may not need income protection if you have sufficient funds available to supplement your state benefit, which can include taking your pension benefits early, having support from your partner or family or an alternative method of income for example via savings.
However, depending on how long you have until retirement age, this is definitely something that should be addressed especially for the generation with a mortgage and young family.
The younger you are, and before any health issues arise as you get older, the premium is usually cheaper.
Long term sickness can be down to the likes of stress, mental health, musculoskeletal injuries or cancer. Manual workers are particularly prone to musculoskeletal injuries, stress is more common for nonmanual workers, and cancer can affect anyone.
People gamble that nothing will ever happen to them so they don’t need the cover.
But anything can happen to anyone of any age or any occupation at any time.
What I would say is this – look around your family, colleagues and friends, social media even, how many people do you hear of who might find themselves in a position where their income suddenly stops? This could be you tomorrow, next week or next month.
A lot of focus is put on regular savings, pensions and investments, which are still important. But protecting income in times of hardship, specifically through injury or illness, is potentially even more vital.
So spare a thought – do you need this cover?
Or put it another way – dare you risk doing without it? Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners,
based in Solihull. Email: tlaw@eastcotewealth.co.uk
The views expressed in this article should not be construed as financial advice