Income protection might not seem the most glamorous thing to think about, let alone write or talk about! but it is important, and we think it’s especially important to small business owners.
Someone who is much more knowledgeable than us is Tarnia at TP Financial Solutions. She kindly agreed to share with us what income protection is, what you need to think about, and how to get it.
When clients approach TP Financial Solutions for protection advice, its normal that they want to discuss life and critical illness cover, lump sum pay outs that cover the large debts you have in life such as loans and mortgages. Very rarely do people want to talk about Income Protection.
This is a surprise really, given that clients and their income, keep the family unit running. Your income earning potential in a working lifetime is huge, and arguably the most important to consider.
From our time advising clients on Income protection, there are a lot of pre-conceptions and myths about the cover, which hopefully during this blog I can dispel. Frequent objections to discussing Income Protection are:
- “I can’t afford it!”
- “I’ve got savings to see me through”
- “I’m young, if I get ill, I will recover quickly”
- “I’ve already got life cover”
- “If I can’t work, I will rely on state benefits”
- “Income Protection policies never pay out!”
- “I bet I’d end up with an illness that isn’t covered!”
- “I don’t know where to start”
- “My extended family will help”
I get it! Income Protection isn’t that straight forward to think about, and it’s got a bad rap. In my opinion and experience, it is fantastic product, it can be designed around you and your specific circumstances (and affordability), and I am going to explain why you should contact us to discuss your Income protection options. Challenge accepted!
Illness is the biggest risk to your family’s financial security
One in four of us would struggle financially if we were out of work for just 4 weeks.
But, despite this Life Insurance is still the sole priority for many families. There is no doubt that life insurance is important, but when you consider that illness is the biggest risk to our income, it should rarely be the first and only policy you buy.
It makes much more sense to protect yourself against illness first, which is why more and more people are recognising the value of income protection.
Income Protection covers any illness, not just critical ones.
Don’t confuse income protection with Critical Illness cover. They are really very different. Critical Illness policies pay out a lump sum if you’re diagnosed with a serious illness as defined by the insurer.
However. An illness doesn’t need to be serious to stop you from earning. In 2020 more than half of sickness absence in the UK was due to illnesses such as coughs and colds, mental health, or musculoskeletal problems.
The beauty of income protection is that it pays out if you are too ill to do your job, not just any job, regardless of the illness or injury. Think of it as fully comprehensive illness cover.
Income Protection keeps paying our month after month
You never quite know how long an illness will last.
Unlike Critical Illness cover which may only pay out once, an income protection policy can pay out a monthly benefit until you are well enough to return to work. So, there’s no need to worry about a lump sum running out.
What’s more, once you recover, the policy stays in place so if in the future illness prevents you from working, you can claim again.
If you are too ill to work, don’t expect much help from the government
Could you manage on just £96.35 per week?
It is tempting to think that if you become too ill to work you can just rely on the state for financial support. However, any help you will receive will be minimal.
If you’re employed, you may have an employer sick pay arrangement for a period of time. After that, you’re entitled to Statutory Sick Pay (SSP) of £96.35 per week for up to 28 weeks.
If you’re self-employed the picture is even worse. You’re not entitled to any SSP, so you’ll need to rely on an application for Employment and Support Allowance from day one.
Income Protection protects your savings as well as your income
It can be difficult to save money.
Even if you’re lucky enough to be able to put money away a little each month, it can take you years to build up a modest rainy-day fund. After all that effort, that last thing you want is to have to spend your hard-earned savings on paying everyday bills. But, if you became too ill to work, you may have no choice.
However, with an income protection policy in place, your savings are safe. The monthly benefit it pays could take case of everyday bills, so you can look forward to keeping your savings for the good things in life.
This applies to your extended family’s savings too, if you expect to reply on them should you be ill, do you really want to eat into their funds? Don’t forget, their circumstances could change too.
It is surprisingly affordable.
Income protection comes with a wide range of options to keep your premiums affordable for you.
Choice of premium options: You can choose between level guaranteed or age-costed premiums. Level guaranteed premiums stay the same for the length of the policy. Whilst age-costed premiums give you the flexibility of a lower starting price which increases over time.
Choice of claim period: A long-term claim period means a claim could potentially pay out for the length of the policy. Or you could opt for a cheaper, limited claim period of either two or five years, meaning that each individual claim pays out for a shorter period of time.
Choice of waiting period: This is the length of time after becoming too ill to work that you wait before your monthly benefit start. The options range from one day, to one year. The longer the waiting period, the lower your premiums will be.
There you go, there’s my case to encourage you to consider Income Protection. If you are still not convinced, give me a call on 01524 920015, I could talk about the benefits of Income Protection all day!
Thank you for reading my blog, I’ve enjoyed writing about such an interesting topic, you can find out more about our business and services on our website www.tpfinancialsolutions.co.uk.
We work on a free initial consultation basis, there will be no cost to you for my advice, we get paid by the insurance company we place your cover with, leaving you with peace of mind, and affordable monthly premiums.
TP Financial Solutions really know their stuff! Do get in touch with them if you need any help or support with your financial planning for you, your family or your business