INCOME PROTECTION: for healthy finances when sickness threatens your salary

Christine Kapak
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With winter firmly taking hold and the dreaded flu doing the rounds, there's never been a better time to take stock of how a more serious illness could affect your finances.
In most instances, a flu bug is nothing that a good dose of Lemsip and daytime TV won't fix. But if you were still too poorly to do your job after a couple of weeks, or a couple of months, how might you carry on covering your regular outgoings?

Statutory or company sick pay may seem the obvious answer. However, the value of the former is often grossly overestimated (it's currently a very modest £88.45 a week), while the latter will only last for a certain period.

Perhaps, then, savings will cover your salary gap? A recent survey by the Money Advice Service suggests otherwise. It found that four in 10 adults in the UK do not have £500 or more to fall back on. Another by ING bank suggests 28% of UK adults have nothing at all in the bank.

Gets to work when you can't

That's where an Income Protection policy could plug the gap. Offering a financial safety net when sickness (or accident, or unemployment) keeps you off work, it can take care of everything from mortgage repayments to the weekly shopping allowance.

Not to be confused with Payment Protection Insurance (PPI), which covers a specific debt if you’re unable to work, Short-Term Income Protection pays out a monthly tax-free benefit that can be used any way you chose.

Typically this is a sizeable proportion of your salary (on average around 50-70%) until you’re able to return to work or you reach the end of the benefit pay out period. Covering essential monthly outgoings like rent or fuel for the car, it means you won't have to rely on family support, overdrafts or other types of borrowing.


Despite these obvious advantages, only 17% of working households in the UK have Income Protection insurance. So why aren’t more people queuing up for a policy? One of the most common myths is that the insurance seldom pays out. But based on reports from ABI, in 2015 over 91% of individual claims were approved, totalling a staggering £131m.

Another concern is the cost of cover but short-term Income Protection, which will provide benefit payments for around 12 months on average, is a much more affordable option than the more comprehensive permanent health insurance, which guarantees pay out until retirement age. This makes this type of income protection cover more accessible to those who cannot afford large monthly premiums.

Reasons to consider Income Protection

Remember, an Income Protection policy will:
• help cover your regular outgoings if you can't work
• make sure that incapacity or unemployment doesn’t become a financial disaster for your family
• avoid the need to rely on savings or state benefits to tide you over
• offer the flexibility to choose a pay-out time period that suits you.

To find out more or to get a free quote click here

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