Income protection insurance is an insurance that covers you in the event that you find yourself unable to work for any reason. Like other forms of insurance, you are required to make a monthly payment to protect your income. These are arranged privately by the individual and are calculated to pay enough to the policy holder should they find themselves indisposed.
Now more than ever, as we face a cost of living crisis, it is important to evaluate every aspect of your finances and ensure that all eventualities are covered so that, should you find yourself incapacitated, you are still able to pay the bills.
What Does Income Protection Insurance Cover?
In the unfortunate, and unforeseen, event that you find yourself unable to work, income protection will pay you a monthly income that will allow you to pay your bills. But what reasons might you be unable to work?
- Long-term back pain
- Depression
- Injuries caused by an accident eg broken bones
- Cancer
- Heart attack
- Stroke
Essentially, it is anything that leaves you unable to do your job. This may be a broken leg if your job involves driving for example. The insurer that you choose will have a definition of incapacity – it is worth checking out what is and what isn’t covered first.
Why is Income Protection so Important
If anything should happen to you and you are unable to carry out your job, how will you manage to provide for you and your family? The mortgage/rent will still need to be paid and the bills will still need taking care of. Your income may go down but your outgoings are unlikely to.
If you are employed, you may get statutory sick pay if you have to take time off or you may have health cover provided through your work. If you are self-employed, it is up to you to ensure that you can cover your bills if you are unable to work due to illness or accident.
How Much Does it Cost?
The amount you will pay for income protection depends on the size of the income that you are wishing to protect and how much of that income you wish to receive should anything happen to you. The following is an example (10/10/22) based on an average wage of £39.452.
Income protection quotation based on average wage in England £39,452.
Based on a male 30 years old and a non-smoker could cost as little as £19.91 – paying you a monthly benefit of £1973.00.
Planning for the Future
You may be fit and healthy and have never missed a day of work in your life. That’s not to say that you won’t suddenly become ill or that you won’t be involved in an accident. Of course, we all hope that these things will never arise but if they do, the peace of mind in knowing that you are covered is worth the premium each month.
Redundancy
Income protection insurance does not cover redundancy – it only covers mental and physical illness that leaves you unable to do your job.
Things to be Aware of
Usually, income protection insurance doesn’t pay out until after an agreed waiting period – this could be 30 days, it could be 90 days. You should know the terms of your policy and have provisions in place to meet your bills during the waiting period. You don’t want to default on your mortgage or fall into arrears with your bills in the meantime.
The Risks of Not Having Cover
You may find yourself unable to work for a year or more. If you have little savings and no other income, you then face the prospect of having no way to pay the bills. This could lead you to lose your home or to face mounting debts. Insurance means that you are covered (after the waiting period) for the fixed time agreed in your policy or until you are well enough to return to work.
If you would like to discuss income protection insurance and find out how much it is likely to cost you, call our team at Buzz Financial who will be happy to provide you with a quote based on the information you provide them with. You can contact us on 01934 756717.