It pays to protect your golden egg

Plan for all eventualities by insuring your income

If you had a goose that laid a golden egg each month, you’d probably look after it really well.

But would you insure it, though? So if the goose got sick and stopped laying eggs, you would have some insurance payments to live off, rather than go hungry.

I would. It makes complete sense to me because the goose is providing your lifestyle and paying your bills.

If you agree with that, let’s try a second question: Do you insure your own income?

So many of us are our family’s goose. We go to work every day and bring home our golden egg each month in the form of our pay cheque.

But if we couldn’t work for whatever reason, what would happen to our income?

If we are lucky and work for a larger employer, we may have up to six months’ long-term sick pay.

But even then, what happens after that if we’re not well enough to return to work? How long could you survive without any income before your Direct Debits start to bounce?

When we’re not well, we need security, peace of mind and time to allow ourselves to recover.

The last thing we need is the stress and pressure of having to rush back to work to pay the bills, if we’re still not feeling 100%.

And the way we do that is with income protection insurance – which is vital for so many people who have little employer support and have financial commitments to make.

Income protection insurance will pay out a tax-free income if you’re unable to work because of an accident, or long-term sickness. It becomes payable after a deferred period, also known as a waiting period, which is typically between three and six months.

The payments will continue until you are well enough to return to work, or the policy comes to its contractual end.

Think of it this way: you’re given a choice of two jobs, identical in every way except one – the first job has an annual salary of £38,600pa, which is the UK’s average salary, but you receive no long-term sick pay benefit. In the second job, you’ll earn £37,400pa but if you’re off work sick, they’ll keep paying you until you can return to work, or until you retire.

The one you’d take is a no-brainer, isn’t it? And that’s how to think about insuring your income.

As a rule, we don’t like insurances because they’re not exciting to have or to arrange.

But we really do need them – and just like car or house insurance, this one belongs on your essential list.

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