Justine's Top 10 Tips
30 Oct 2020
Justine’s Starter for 10
Income Protection – the basics
LifeSearcher Justine Shaw is a Senior Adviser and Protection Specialist, and one product she’s particularly close to is Income Protection. Justine thinks everyone should explore Income Protection. Here’s why…
- The reality
- The average claimant
- The product
- Is Income Protection another kind of Critical Illness Cover?
- The price
- What’s your contingency plan?
- I have an expensive lifestyle …
- Does Income Protection cover redundancy?
- Does IP pay out for Covid-19?
- Is Income Protection more important than Life Cover?
You’re 5 x more likely to be seriously ill before you’re 65 than you are to die before then. Without protection, if you’re ever unable to work your household will lose your salary … and it’s not like your bills or running costs disappear.
All of us, especially younger folks, like to think we’re invincible. But the average Income Protection claimant is only 42. And in 2020, one in four people don’t have any kind of financial safety net. If you lose your income that’s a problem.
Unable to work, an Income Protection policy pays out 50-70% of your monthly salary. Payment comes after your chosen deferment, or lay, period, which can range from one week to 12 months. People tend to choose a deferment period based on their employer’s sick pay policy.
No. It’s an easy mistake to make but Critical Illness Cover protects against named, specific illnesses, starting with cancer, heart attacks and strokes. Income Protection is there if you’re signed off work, regardless (within reason) of why.
Income Protection can cost as little as £5 per month, but I’d say £20 is more realistic. As ever, price depends on your work, age, health, lifestyle and smoker status. But we can always try to tweak a policy to find you affordable cover.
If you’re too sick to work, statutory sick pay comes in at about £100 per week. Without protection, it’s all-but-guaranteed you’ll have to make significant changes to your lifestyle.
Think about your situation: if you lost your salary what would you do?
Get into debt? Pillage your savings? Move in with parents? Cut back on lifestyle? With Income Protection you don’t have to.
Sure. But Income Protection isn’t a one-size-fits-all thing, it’s relative to your situation.
Say you keep 10 horses (or 100 dogs), that’s a serious running cost. We can tailor-make cover to suit. If you do happen to have a zoo in your garden, we can build a policy that ensures you won’t have to get rid of your animals should your income take a hit.
No. We’re asked this a lot right now, for obvious reasons. But Income Protection does not cover redundancy. Other policies are there for that. Income Protection is for when you’re signed off due to ill health or an injury that prevents you working.
This may sound controversial, but the majority of people with Covid-19 experience mild symptoms that last for days and weeks… not months and years.
Remember the deferment period. Say yours is 90 days, it’s unlikely (based on probability) that Covid-19 will have you off work this long.
Having said that, it’s unlikely but not impossible and most insurers will sign off Income Protection claims if Covid-19 impacts long-term health. This is a changeable situation, however, it’s evolving all the time.
Life cover pays out when you die. Generally speaking, it’s there as a financial safety net for your family and/or to cover your mortgage.
So it depends what stage of life you’re at. If you’re young, renting, and don’t have financial dependents, it could be more advantageous to protect yourself against a sudden loss of income than buying life cover. That can always come later.
For more information or to ask a question. Get in touch with me at JustineShaw@Lifesearch.co.uk