Six reasons to consider Income Protection insurance
If you had to, could you survive on your savings alone? Most people couldn’t. 15% of Brits have no savings, and 33% have less than £1,500. When broken down by age, the picture for the young is particularly bleak, with 53% of 22–29-year-olds having no savings. So if you don’t have savings, what happens if you get ill?
Income protection provides you with a safety net. If you’re struck down with a long-term physical or mental illness that stops you from working, income protection provides you with a monthly replacement income. Depending on the policy, this usually ranges from 50–75% of your income. Income protection is different from critical illness insurance, which provides you with a one-off payment in the event of illness.
The consumer advisory organization which recommends income protection as the most important type of insurance, yet a staggering 91% of working adults don’t have any form of income protection in place, here are five reasons why income protection is crucial.
More young adults are claiming
It’s easy to dismiss income protection while you’re young and less likely to be struck down by age-related illnesses. Still, sadly more young people need to take time off sick. Research from insurance provider The Exeter shows that claims for income protection are rising fastest for those in their thirties.
Income protection covers both physical and mental health.
Income protection isn’t limited to physical conditions; it also protects those struck down with mental health issues. According to the WHO, 25% of adults in Europe suffer from some period of either depression or anxiety. In 2017, mental health was the most common cause of claim on income protection, according to the Association of British Insurers (ABI).
Income protection helps you cover your expenses.
Buying a house is one of life’s important milestones. Getting on the property ladder usually requires a lot of sacrifices, with young people living at home for longer, and taking fewer holidays. Even once you’ve built up a deposit and moved in, you still need to keep up with the mortgage payments. With income protection, if you’re ill, the mortgage is covered. Even if you’re renting, bills still need to be paid, and if you’ve ever moved house, you’ll know how stressful it can be. It’s not something you want to do while unwell.
You can focus on recovery.
Whether your illness is physical or mental, the best thing that you can do is focus on yourself. Financial stress won’t help, and if you’re worried about money, you might end up going back to work before you’re ready, which could make your illness worse. Income protection makes a stressful time more manageable.
State support for long-term sickness is limited.
The standard sick-pay allowance is not a suitable replacement for income protection insurance. While larger companies often offer better policies as a benefit, the majority of the UK workers would be entitled to less than £100 a week for a maximum of 28 weeks if they fall ill. Once this period is over, they’ll be entirely reliant on savings or benefits. A lot of workers don’t realize this until they find themselves in this situation. Crucially, despite the massive rise of self-employment in Europe and America, freelancers aren’t eligible for sick pay. This gap in coverage was one of the reasons that we developed VouchForMe’s income protection. To ensure that everyone can access suitable insurance, including gig economy workers and sole traders.
Income protection covers you for accidents.
Even if you have the healthiest lifestyle and are less likely to develop an illness, there’s no way that you can protect yourself against accidents. Accidents and injury make up almost a third of income protection claims. So it’s not a scenario you should dismiss.
But what if I never make a claim? Don’t I end up worse off?
If you never claim, it’s easy to see the money that you spend on insurance as wasted. So we’ve created our unique peer-to-peer income protection product, which gives you control over your insurance fund. Rather than paying a premium to an insurance company, using VouchForMe’s income protection, you can build up an emergency fund with a group of like-minded individuals. Should you end up needing time off work for illness or injury, you’ll be supported for up to two years by the group. By two years, 99% of people are back to work, but if you need coverage for longer, an insurance company can provide ongoing support. The money remains yours, and if you choose to leave, it’ll be returned to you minus any claim payouts. Visit our webpage to find out more.