Do I Actually Need Income Protection?

Insurance products are not the most interesting of subjects. There’s also a lot of them out there; car insurance, home insurance, pet insurance, travel insurance, phone insurance… How much insurance does one person need?!

Let’s add life insurance to that list – and not only life insurance. There are more products that sit underneath the life insurance umbrella, such as mortgage protection insurance, critical illness cover, income protection and more.

In this article, I’m going to be talking specifically about income protection. What is it, how does it work and do you actually need it?

Firstly, what is income protection?

If you are not familiar with income protection, it is a life insurance product that is designed to give you a regular replacement income if you become too ill or injured to go to work.

If you become ill or injured and make a successful claim on your policy, it will usually pay out a regular percentage of your normal salary (typically between 50-70%) until you either go back to work, reach state pension age or pass away during the claim period. Whichever comes sooner, basically.

How does income protection work?

So, you’ve taken out an income protection policy and you find yourself in a position where you need to make a claim. Usually, your policy will not pay out immediately. This is because most policies will include a deferral period. You will decide on the length of this deferral period when you take your policy out.

It could be four weeks, four months, or 12 months. The longer the deferral period, the cheaper your premiums are likely to be. The deferral period is basically a period of time that must pass before your premiums kick in. However long you choose this to be, it’s important that you factor this in as during this time, you may not be earning money and you won’t be receiving payouts. It may be that during this time, you will be receiving Statutory Sick Pay from your employer, or living on a separate chunk of savings that you have put aside.

When you take out your policy, you will also decide if you’d prefer monthly or annual payouts. These payouts are designed to help life ticking over as normal whilst everything potentially feels as if it has been turned upside down. It allows you to keep meeting rent or mortgage payments, bills and debt repayments, and allows you to continue paying your regular living costs.

Ok, so do I actually need income protection?

Here’s a statistic for you – according to the ABI, one million workers a year find themselves unable to work due to a serious and long-term illness or injury. Who’s to say that you won’t find yourself as part of that one million?

You’ll probably find that a lot of people in your life will have a life insurance policy. Life insurance pays out upon your death. However, do you think you are more likely to pass away before retirement or get seriously ill or injured? My money is on the latter. The average life expectancy is much longer these days than ever before. Whilst that’s great, it’s also more time for us to suffer with health conditions.

If you have an income and financial responsibilities, you should seriously consider this insurance product. If you also have a family, then think about it even harder. What would your children do if you lost your income and couldn’t provide for them anymore? Would you lose the roof over your heads? Would you be able to pay for those school trips and new uniforms? Would family holidays be a thing of the past? Income protection means that you don’t need to give everything up if the worst happens.

Convinced? I hope so! If you need more information about income protection, then I recommend speaking to a broker. They will usually be able to provide free advice and free quotations from the best providers to get you started. It needn’t be a headache. Get yourself covered, and enjoy the peace of mind that you are protecting the life you love.

Post shared in collaboration with the aforementioned company.

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