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Planning for the Unexpected
Life can be unpredictable, and while we all hope to enjoy good health, serious illness or disability can strike when least expected. For many, this means an abrupt halt to their income, creating financial stress during an already challenging time. This is why having the right financial protection in place is crucial.
Our latest article in the ‘life stages’ series looks at protecting your income during illness or disability.
Understanding the Risk
Statistics show that the likelihood of needing time off work due to illness or injury is significant.
The number of women who are off work because of long-term sickness has risen by 48 per cent¹ reports the TUC. With figures reaching 1.54 million¹ in the past five years, this is highest number since records began.
Many employees in the UK rely on Statutory Sick Pay (SSP), which provides £116.75 per week² for up to 28 weeks. However, this is often much lower than their regular earnings.
Those without access to enhanced sick pay schemes may face significant financial strain, particularly during long-term absences.
Yet, many people underestimate the risk or assume they’re adequately covered.
Income Protection: Your Safety Net
Income protection insurance is designed to step in when you’re unable to work due to a specified medical condition. It provides a regular income until you recover or reach retirement age, depending on the policy. Importantly, income protection differs from other forms of insurance because it typically covers a broader range of illnesses and injuries, offering peace of mind for you and your family.
Why It Matters
The UK’s state benefits system offers limited support in the event of a loss of income, often falling short of covering essential expenses like mortgage payments or bills. Private savings can be helpful, but for most, they won’t stretch far enough to cover an extended absence from work. Income protection helps you maintain financial stability without depleting your savings.
Tailoring Your Cover
When considering income protection, it’s essential to choose a policy that aligns with your needs:
- Deferral Period: How long you’ll wait before payments start (consider how long your current savings might last). A longer deferral period often reduces premiums.
- Level of Cover: Some policies cover a percentage of your income, while others provide fixed payouts.
- Policy Terms: Look for policies that cover both short-term and long-term absences.
A financial adviser can help you navigate the options to ensure the policy fits your lifestyle and budget.
Taking Action Today
No one likes to dwell on the ‘what ifs,’ but preparing for life’s uncertainties is a practical step toward protecting your future. Whether you’re self-employed, the main breadwinner, or part of a dual-income household, securing income protection could be one of the most valuable financial decisions you make.
If you’d like help reviewing your current protection or exploring new options, please get in touch today. Planning ahead doesn’t just provide financial security—it gives you the confidence to face life’s challenges head-on.
¹TUC long-term sickness becomes top reason for women being out of the labour market May 2024
²Gov.uk April 2024
Further Reading
Additional articles in this series include:
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