We complete our 3-part essential insurances series by further highlighting the value of income protection this year. Let’s dive deep on the critical benefits and some alarming facts!
Guarding Your Greatest Asset – Income!
As sci-fi novelist William Gibson famously said, “The future is already here – it’s just not evenly distributed”. How right he was. Similarly, your single most valuable personal asset – ability to earn – is inconsistently protected. Income protection insurance fills this gap by supplying replacement pay when you’re off work.
According to the Office of National Statistics, between June and August 2022, 2.5 million Brits reported long-term sickness as the main reason for economic inactivity. For the average household, missing just 8-24 weeks of work equates to £4,000-12,000 in lost gross income. Without contingency reserves, families risk defaulting on mortgages, drawing pensions early or accumulating dangerous debt levels to stay afloat.
Core Policy Benefits
Good income protection delivers certainty amid uncertainty. Policies provide clear tax-free replacement income of between 50% and 70% of normal earnings for injury, illness and disability. This consistent cash flow allows focussing fully on medical and lifestyle priorities rather than finances through recovery and return to work phases. Some insurers even cover extras like paying for rehabilitation programs and transitional part-time earnings support.
Tax Benefits
Many policies allows tax relief on income protection premiums for employees and self-employed up to set thresholds. This incentivises securing coverage aligned to modern lifestyles. Self-employed workers apply through self-assessment.
Government Support Expansions
New individually assessed plans help those unable to work full-time return part-time – with government payments compensating partly for income differences.
Updated guidance means combining this assistance with privately held income protection is fully workable. [Mark, please review this section specially]
Benefit Duration Flexibility
Income protection terms can extend right until retirement age if desired. This ensures income continuity if unable to work for long periods. Alternatively, shorter 2-5 year policy terms cost less while still protecting through typical recovery periods.
Experts help determine ideal duration aligned to age, existing cover and financial planning.
Claim Process
Submitting a claim simply requires medical certificates confirming inability to work beyond the initial waiting period. Typically between 4-12 weeks. Ongoing eligibility gets assessed periodically via doctor’s reports and evaluations.
Pre-existing conditions may have cover exclusions or delayed benefit start times. So upfront disclosures are essential when applying.
Financial and Lifestyle Security
Income protection provides tremendous peace of mind knowing income losses have robust backup. A safety net when you need one. This allows focusing fully on health and recovery without mounting money strains.
It is amazing that some employees can’t imagine life without it, whilst some don’t even know it exists! Others don’t even know there sick pay entitlements!
Some policies even cover additional costs like medical bills, rehabilitation services, home modifications or vocational retraining for alternative careers if returning to previous jobs becomes impossible.
When 100% fitness isn’t possible, supported partial return to work programs give life purpose while benefits compensate remaining income differences. Advisors help structure the right blend of state and private support payments to sustain lifestyle needs.
Policy Exclusions
What exactly constitutes being unable to work enough to claim varies by insurer. Most define this as an “inability to perform the core duties of your specific occupation.” Some policies necessitate being unable to work in any occupation based on experience, qualifications and transferable skills.
Certain high-risk hobbies, dangerous pursuits or pre-existing health issues may incur exclusions too.
Income Protection for Self-Employed
Self-employed and contract workers have rising policy access thanks to recent underwriting improvements. Benefits account for fluctuating incomes by calculating payouts based on average earnings over past 2-3 years.
This ensures stability for the over 15% of UK workers now self-employed. Specific agreements for those working beyond state retirement age also exist.
The Reality of Long Term Absence
While we like believing that missing work happens only to others, statistics reveal uncomfortable truths. Per a UK govermnent survey data, one in four (25%) employes reported having at least one long term physical or mental health condition. YIKES!
That illustrates why income protection merits priority over optional gadgets or luxuries that derail achieving financial peace.
Advice For Securing Policies
As a leading broker, Mark One Financial Services makes securing income protection simpler. Our team of advisers clarify the small print. We align cover levels and waiting periods to the client’s peculiar situation. So rather than off the shelf packages, your solution fits your needs and financial capacity perfectly.
If anything is learnt from the global events of recent years, it’s that the future holds growing uncertainty. Income protection insurance enables stability for top priorities – family and health. Don’t allow the most valuable asset, your ability to earn, go unguarded. Speak to our expert team today for income protection aligned to your unique needs.
This concludes our 3-part series on essential insurances. Look out for more informative pieces on our blog to come.
Whatever your insurance need, remember, we’ve got your best interest at heart.
Thanks for reading!
Note – The information contained within was correct at the time of publication (January 2024) but is subject to change.