Income Protection

Matthew Harrington
Financial Planning
Matthew Harrington

With the rising cost of living, protecting your income has become increasingly important. So, what would you do if you were unable to work due to a long-term illness or injury and your income dropped, or worse, stopped?

Matthew Harrington

How would you provide for your loved ones? Pay the bills? Cover the rent, mortgage – and everything in-between? People often protect their homes, gadgets, cars, and pets, but do not insure the very thing that pays for it all – their income.

Around one million people a year find themselves unable to work due to injury or illness, according to the ‘Association of British Insurers’. This is not just about being off work, it is the length of absence that really can impact your finances. On average, a UK employee has enough savings to last just 19 days if their income stopped, and nearly 2 million adults have no income left at the end of each month (Legal & General ‘Deadline to Breadline’ report 2022).

How would you cope financially?

This is where income protection can help. Income protection insurance is designed to cover your salary if you cannot work, due to an illness or injury, such as a back injury, stress, or chronic conditions like multiple sclerosis. Unlike life insurance, which pays out an agreed lump-sum to your dependants on death, or critical illness, which pays out a lump-sum if you receive a diagnosis that appears on the insurance providers pre-defined list of illnesses.

Income protection provides a monthly income (usually around 60 percent of your salary) until you are healthy enough to return to work. In addition to this, insurance providers can offer a range of services to support your mental and physical health - usually at no extra cost.

Rehabilitation support services gives you access to early intervention treatments and a team of healthcare professionals, who are available to provide specialist advice and support to help with returning to work.

To March 2021, the Office for National Statistics (ONS) estimated that the average UK household expenditure was £481.50 per week, or approximately £2,086 per month (and likely to be higher now.). Based on a male, 32, non-smoker, income protection providing the same level of benefit to match those average outgoings could cost as little as £42 per month and provide an income for the insured and their family right through until they reach state pension age.

Income protection is sometimes seen as a complex policy, as there are a wide variety of options to consider. By obtaining advice from an independent financial adviser, this will help to find the best possible solution tailored for you.

For more information about Income protection or to speak to a financial adviser

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