Put a price on peace of mind

Why income protection insurance is a must-have If you became ill and were unable to work, would your family be able to manage financially?

It’s something that few of us consider as we rush about leading busy lives but more of us really should.

Around 1,000 Brits are diagnosed with cancer every day, according to Cancer Research UK – and no one is immune from this cruel disease, as the recent shocking news about the Princess of Wales showed.

Our thoughts are with Kate and everyone else who is going through such challenging times.

But it got me thinking: if you had a goose that laid a golden egg each month, you’d probably look after it really well, wouldn’t you?

But would you insure it, so if the goose got sick and stopped laying its golden eggs, you would have the insurance payments to live off rather than go hungry?

I would, because it makes complete sense to me. After all, the goose is providing your lifestyle and essentially paying your bills.

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

Many of us are our family’s goose. We get up and go to work each day to bring home our golden egg in the form of a monthly pay cheque.

But if, for some reason, you suddenly became unable to work, what would happen to your income?

If you’re lucky enough to work for a large employer, you may have up to six months of long-term sick pay.

But what happens after that, if you’re still 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

How long could you go without an income before Direct Debits bounce?

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 not 100%.

That’s why income protection insurance is vital for the people who have little employer support.

It will pay out a tax-free sum if you’re unable to work because of an accident, or long-term sickness, which becomes payable after a deferred period – typically between three and six months.

The payments normally 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 that are identical in all ways except one: the first job has an annual salary of £34,900pa (the UK average) but you receive no long-term sick pay benefit.

For the second job, you’ll earn £33,900pa but if you’re off work sick, they’ll pay 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 you should 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 do need them – and just like car or house insurance, income protection insurance should belong on your essential list.

To find out more on managing your finances, visit lexingtonwealth.co.uk