No doubt, you have financial commitments. Just think about all those costs that rack up month after month – for example your mortgage, rent, food bills, gas and electricity, childcare costs and school fees. And how about holidays, birthdays and other special occasions? How would you continue to pay these if your regular income was to stop?
Every day in the UK:
- 996 people are diagnosed with cancer (Cancer Research UK)
- 14 people are diagnosed with Multiple Sclerosis (MS Society)
- 24,000 people are injured due to an accident (Department of Transport)
Would you cope if you lost your regular income due to long term illness or injury? According to the Association of British Insurers (ABI) one million workers a year are unable to work because of just such a reason.
You know better than anyone that you too could also be a statistic. Yet do you have a plan for such an eventuality?
Could you get by on your sick pay?
Sick pay from the NHS is dependent on your length of service. Fall ill within your first 4 months of working and you will receive one month of full pay. This rises to a maximum of 12 months after 5 years of service, 6 months of which is at half pay. What are you entitled to? Will it be enough to prevent financial hardship should you fall ill?
Or survive on government benefits?
Statutory sick pay (SSP) is worth £94.25 a week, payable for up to 28 weeks. But assuming you qualify, how far would this actually go towards your costs? You may be entitled to other benefits but eligibility and amounts claimed will vary depending upon your situation.
Is taking early retirement an option?
The NHS pension allows you to take retirement benefits early if you are permanently unable to work due to illness or injury, and you have at least two years’ membership of the scheme.
Ultimately your entitlement to ill heath retirement benefits is at the discretion of NHS Pensions and their medical advisers – and is not guaranteed.
If you are eligible, your benefits could be affected by a variety of factors, including: which pension scheme you are in; the type of doctor you are: your pensionable earnings; length of service; and the severity of your condition.
Perhaps you have enough savings to support yourself?
You may be in the fortunate position of having a savings ‘buffer’ – but no doubt you are hoping to use these savings for another reason such as a dream holiday rather than for surviving on? Whatever the amount of savings you have, they will be finite – how long would you realistically be able to survive on these if you had a long term illness?
Will a partner or family member help out?
Having a supportive family provides emotional relief, but for how long would they be able to financially support you? And would you want to burden them with such a responsibility? What would happen if your partner also fell ill, do they have protection in place?
You may have insurance that covers the loss of some or all of your income?
You may have cover such as Accident, Sickness and Unemployment (ASU) insurance in place. But such cover may not be enough. ASU typically only pays out for 12 – 24 months. Other insurance will only cover specific costs, such as mortgage payment protection cover.
If, having considered your options, you will need some other way to keep paying the bills you might want to consider income protection insurance.
Income protection insurance is a long-term insurance policy designed to help you in such circumstances. It ensures you continue to receive a regular income so that you can continue to cover everyday costs once your own income stops. It will continue to pay out until you can return to work again – or until you retire, die or the end of the policy term – whichever is sooner.
It’s helped thousands of people who would otherwise have suffered financial difficulty.
“When I first received my diagnosis and had to stop work I panicked that I wouldn’t have enough money, it was beans on toast every night. Once my income protection provider had approved my claim it was an enormous relief.”
Here’s how income protection helped one of our clients:
When Jackie*, aged 35, was diagnosed with a terminal illness, she had to cease working as a partner in a successful GP Practice. Jackie claimed on her income protection policy, which pays out nearly £4,000 a month.
The difference this cover has made to her life can’t be over-stated, taking away any financial worries during such a stressful time. Although very sadly her condition is incurable she is able to find ways to enjoy her life as much as she can, in the time she has left.
Jackie has now visited the Arctic with her Mum, a very expensive holiday made possible because her income is secure. She has further holidays planned.
* This is a real case study however the claimant’s name has been changed to protect their anonymity.
Income protection could be the solution for you but its flexibility for individual needs means there are many elements to consider when buying this cover.
Cover for pre-existing conditions
Some policies cover certain illnesses that you have had before, whilst others don’t. Make sure you are clear on the terms of any policy that you take out.
Length of deferred period
This is the period of time you have to be out of work due to illness or injury before any benefit payment can be made. The longer the deferred period, the lower the premiums may be.
Occupation cover
There are different definitions of occupation which affect your ability to claim on a policy. If your policy has an ‘own occupation’ definition, then you are covered if you are unable to do your own job due to accident or illness. By contrast, ‘any occupation’ (where you have to be unable to do any job at all), is much harder to claim on.
Inflation-proofing
The costs that you are looking to cover may increase due to inflation – but will the payout on your policy also increase to protect against this? It may be possible to index-link your cover so that it increases in line with inflation.
Rehabilitation cover
This allows you to return to work part time or on a phased return. It can help with the recovery costs you may face, as well as such elements like the cost of special equipment or workplace alterations necessary to help your return to work.
Waiver of premium
You usually have to keep paying your premiums for your policy to be valid, even if you’re unable to work. However, you could think about taking a ‘waiver of premium’ option which provides cover on your premiums during the period that you’re claiming for.
Premiums
If quoted premium costs are too high for your budget, don’t give up. Consider the amount of cover needed, changing the deferred period, and cheaper alternatives that provide cover for one or two years only.
“A policy can cost as little as £25.57* per month – and you could have earnings to protect of at least £1.3 million over your career. So why risk your financial health?”
* Based upon a 25 year old non-smoker to age 68 for £442 per week (£22,992 per annum) of benefit. Assumes a 25 year old earning £31,346 is off work due to ill health until retirement age 68. The benefit and premium will increase with inflation.
Seek advice
Choosing income protection can be complicated. At Chase de Vere Medical we can help you consider what type of plan is best for you and your budget. We can also check any existing cover to see if it’s still right for you and plug any gaps so that you’re protected right the way through to retirement.
It’s never too soon to take care of your financial affairs. Our guide has tips on how to make sure you’re on track for the year ahead and feel confident that your money is working hard for you.
Content correct at time of writing and is intended for general information only and should not be construed as advice.