Copy article

Why is income protection important?

ended 03. March 2022

A journalist at Thisismoney / Mail Online (and a Newspage friendly) is writing a piece on income protection. Her questions are below. 

  • Why is income protection so important? How does it protect you in a way in which life insurance won't? 
  • Do many people have this product? If not, why? 
  • How can customers find out more about this type of product? Who are the main providers? 
  • Has the pandemic had an impact on the variety of products on offer? Has it ramped up the cost of the premiums? 
  • Has this changed now? As in, are there more providers/products available now? 
  • How can people reduce the cost of the premiums? If you delay in having the claim awarded, for example, does it reduce the cost.?If so, by how much roughly (please provide examples if possible)? Are there any other ways to reduce the cost? 
  • How long should someone take out income protection for? 
    What should income protection cover? Should it cover your entire salary?

No need for an essay. Keep it short and sweet.

1 responses from the Newspage community

Copy all

Copy

John Foster
Managing Director at Fosters Financial
Life insurance pays a cash lump sum to help cover a large debt such as a mortgage, whereas income protection is designed to pay a smaller, monthly amount. Its purpose is to replace a percentage of your monthly income (usually between 60 – 70% of your gross pay), so if you were unable to work due to an accident or sickness, you can still pay for essentials such as your mortgage, rent and household bills. Income protection is vital, and I always advise my clients to take it if they can afford to. If you don’t have it and your employer doesn’t provide sick pay, then you will only receive statutory sick pay (£96 a week) which won’t go far. Yet, for less than a week’s statutory sick pay, you could get a very comprehensive policy which will cover you should the worse happen. A lot of our clients do take this type of cover, but many continue to have the ‘it won’t happen to me mentality’. The reality is the chances of it happening are high. We’re not talking about a severe illness, but something as simple as breaking your leg and not being able to work. There are lots of great providers including Legal & General, Aviva, Friends Life, and Vitality to name a few and I would always recommend speaking to an expert to help you get the right cover for your needs. The pandemic has had a massive impact on the variety of products that are available. The premiums haven’t really been affected, but the qualifying criteria has certainly become more complex. However, with more providers now returning to the market, this is improving and ultimately helping more people obtain this type of cover. So, if you have taken out a policy within the last few years, I would advise reviewing it to ensure that it still provides the best cover for you and your family's circumstances. There are several ways you can bring down the cost of your premiums, such as deferring the time your policy pays out i.e., after one month. You can also choose to cover a smaller percentage of your income to pay for the cost of your essential bills. Something is better than nothing, but you should aim to cover as much as possible within reason. Your policy should also pay out until you either go back to work, reach the age of retirement, or are no longer signed off by your GP.