Is it worth getting income protection insurance?

Is it worth getting income protection insurance?

9 Nov 2020

Income protection isn’t mandatory. Sure, sometimes insurance providers will give you a hard sell and try to convince you to take out every insurance product under the sun, and many mortgage providers won’t lend to you unless you have some sort of protection policy in place, but it’s best to buy one or two policies wisely than it is to panic buy a lot of policies that don’t cover you as well as they should. 

For many people, one well-considered policy is enough. For some this is a mortgage protection policy, and for others, it’s a full coverage whole of life insurance policy. For many, income protection is the right choice, as it provides them with some peace of mind about putting food on the table and paying the bills should they get severely injured or become too sick to work.

How can income protection help me?

According to the ABI, (Association of British Insurers) a staggering one million workers a year find themselves unable to work due to a serious injury or illness. Income protection is there to cover you if you find yourself as part of this one million. 

Income protection works by replacing a percentage of your salary every month (usually 50-70%) until you either:

  • Can go back to work
  • Reach state pension age and retire
  • Die during the period of the claim. 
You’ll be able to set the percentage of your salary you want replaced when you buy your policy. If you're sick or injured, Income Protection Insurance will enable you to pay your bills and provide for you and your loved ones. Most policies cover things like strokes, heart attacks, cancer, spinal injuries, head injuries and loss of limbs. 

You’ll also need to set a deferral period, which refers to the length of time between making a claim and beginning to receive monthly payouts. The longer the deferral period, the cheaper your monthly premiums will be. 

The cost of income protection also relies on a few other variables, like many other life insurance products. It will depend not only on the amount of your salary you want to receive back each month, your deferral period, the things you want to be covered for, but also your lifestyle, age, job, current health, and medical history. 

So is income protection worth it?

Different types of coverage are designed for different situations. You need to weigh up which situations you think would be the most detrimental to you and your loved ones and find a policy that protects against that. Many people choose income protection as not being able to work is their biggest worry. 

The fact is, you’re much more likely to be off work sick or with an injury than you are to die before retirement. If being able to pay off your mortgage or care for your kids is what you want your cover to help with, then ensuring that you’ll have regular income even if sick or injured is vital. Of course, if you want that extra peace of mind, you could still buy a life insurance policy alongside an income protection policy, to protect your family if you pass away whilst still burdened with financial commitments. 

One of the biggest differences between an income protection policy and any other policy is that income protection pays out in monthly instalments, rather than in one lump sum. This makes it much harder to mismanage money, and allows you and your family regular, consistent income until you’re back on your feet.

Whilst income protection could benefit anyone with financial commitments that rely on their income, income protection is most vital for self-employed people. Without Statutory Sick Pay (SSP) to rely on, the second you become unable to work, you’ll be vulnerable. Whilst there are ways to receive support from the government like an Employment and Support Allowance, many people don’t qualify, and benefits change over time, whereas a policy is a contract that will protect you, as arranged, for the whole of the agreed time period. 

When don’t I need income protection?

If you’re not self-employed, then you should be eligible for Statutory Sick Pay. When you’re considering a policy, it’s important to work out if you could survive on SSP (currently £95.85 per week for up to 28 weeks) and any savings you might have. Whilst there are very few people who wouldn’t benefit from income protection, if you think you’d be okay living on your SSP or savings indefinitely, or if you could fall back on government benefits or your friends and family, then it might not be a priority for you. 

If you don’t have other people depending on your income, then it also might not be a priority for you. However,  unlike other protection products targeted at helping you to protect your family against something happening to you, income protection is important even if it’s just you. Even if you live alone, you’ve still got bills to pay, food to buy, and a life to live.  If illness or injury means you can’t pay the bills then you’ll be in a sticky spot whether you have other people depending on your income or not. 

Consider protecting the life you love today. The team here at LifeSearch are only a phone call away if you need a little guidance finding the right life protection products and policies. Contact us or give us a call on 0800 316 7253. 

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