Protecting your family against a sudden loss of an income

According to the Office of National Statistics (ONS), the cost of property has increased by 67 per cent in the last ten years. Coupled with the current inflationary rise of just about everything else, many families now find themselves needing two incomes to achieve and maintain the lifestyle they want.

Should either of those incomes unexpectedly stop, it could spell financial difficulties – or at the very least, a serious adjustment to your family’s standard of living.

If you’re single, or the sole earner in your family, a sudden loss of an income will have an even greater effect. There might be no one else you can rely on to help pay the bills – and unless you have another source of income, your ability to cope financially will be severely affected.

Do I need income protection insurance?

If you’re employed and too ill to work, you’re likely eligible for up to 28 weeks of statutory sick pay, funded by the government. This is currently set at £116.75 per week* – not nearly enough to cover most people’s outgoings.

What’s more, being unable to work due to illness or injury is more common than you might think. According to the ONS around 1 in 14 people of working age are unable to work due to an illness or injury.

You may be in the lucky position that your employer offers more generous sick pay than the statutory minimum (perhaps up to three or six months at full pay, followed by a percentage of your salary for a period after that). Often this depends on how long you have worked for the company, so it’s important to check your employment contract to see where you stand.

How does income protection insurance work?

An income protection policy will pay you a monthly income if you are unable to work due to an illness, injury, disability, or through unemployment.

It is different to critical illness insurance, which pays out a lump sum (instead of a monthly income) if you were to be diagnosed with a specified serious illness.

With income protection insurance, physical conditions like chronic back pain, a stroke or cancer can be covered, as can stress-related or mental health illnesses if they impede your ability to work. You can also choose an income protection policy to protect you against unemployment, but this type of policy will only typically pay out for 12 months or less.

Bear in mind that an income protection policy won’t typically cover your entire earnings, but will pay out 50-70 per cent of your salary.

What types of income protection are there?

You can choose a long-term policy, which lasts until you retire, or a short-term policy, which typically pays out for 12 to 18 months.

For more information about income protection and other types of protection policy, please visit our website or call 01257 260011.

*Data from .gov.uk website

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