When we advise on protection insurance for clients; we discuss three areas:
- Life cover - which pays a lump sum to repay debts or to your loved ones to replace your income should you die.
- Critical illness cover - which pays a lump sum, or regular monthly income to you if you are seriously ill.
- Income Protection - which pays a regular monthly income to you if you are unable to work (as signed off by your GP).
When we consider the above in terms of statistics; the most likely of the three protection policies to pay out is most definitely Income Protection.
According to the Association of British Insurers, (ABI), in 2017 around 1 million people found themselves unable to work due to serious illness or injury.
But very often Income Protection is over-looked in my experience. Your biggest asset in your pre-retirement years is your ability to work and earn money; if you cannot work, then it is highly unlikely that you will continue to be able to make ongoing mortgage repayments or reach any long-term financial goal you have.
Income protection has the benefit to you of being medically underwritten before your cover starts (unlike an Accident, Sickness and Unemployment policy which offers a much, much reduced and less certain level of cover). It therefore will pay out when you cannot work and are signed off by your doctor. The better plans will pay out until you return to work (however long that may take), retire or die. Budget plans will often only offer 12 or 24 months cover over a complete working life, but with the benefit of significantly lower monthly premiums.
The cost of an Income Protection policy will be dependent on the level of cover, term you require, your state of health, age and occupation.
So, some bullet points for protection plans:
Illness or injury can strike at any time; sadly we do not know if or when this will happen.
You must buy protection insurance before the claim event.
If you are young and healthy, it is cheap.
Once you are older or have issues, it will become expensive or even unobtainable.
Get cover tailored to your circumstances; the right deferred period, level of cover and term.
Currently, Statutory Sick Pay is £94.25 per week, for no more than 28 weeks, so while there is some State benefit available (if you qualify) it would probably only cover a very limited proportion of your monthly outgoings.
Most employers will sympathise, but infinite sick pay and a job for life is not a legal requirement.
High stress levels do not usually lead to good outcomes; making yourself financially secure will assist with recovery in the long term.
Arrange an Introductory Meeting to discuss your Protection needs
Please contact me at sja@martin-redmanpartners.co.uk or call on 01223 792 196 to arrange an introductory meeting, at no cost to yourself.