The case for income protection
Why cover is more critical now than ever to help protect those closest to you.
The coronavirus pandemic comes with wide-ranging and often unprecedented consequences for individuals and their families. The biggest and most serious is clearly the health dimension, which continues to unfold. But the economic disruption caused by the rapid spread of coronavirus has already had a huge impact on financial and employment security.
Several measures have been taken to minimise the short-term financial damage, including a UK government job retention scheme allowing employers to furlough workers who were on their payroll up to 19 March 2020, with the government covering up to 80% of salaries.
Restrictions on access to Universal Credit have also been eased to help alleviate the financial stress that many people are under, while banks are offering mortgage payment ‘holidays’ and freezing overdraft charges.
Too few people were prepared
The problem is exacerbated by the ‘protection gap’ – the difference between the insurance cover that people would ideally have and what’s actually in place.
“One of the key issues is that many people are not prepared for any kind of emergency, and therefore do not have the necessary financial support systems in place,” says Samantha Jackson, Managing Director of Cooper Associates Group. “No one likes to think of themselves becoming ill before they retire, but in reality the chances are often quite high.”
Yet take-up of Income Protection insurance, which pays out a regular income if you’re unable to work because of an illness or an accident, remains low.
Eight in 10 people with a mortgage have no Income Protection in place, while four in 10 don’t have any life insurance, according to Royal London’s State of the Protection Nation report from June 2019.
Protection doesn’t have to be pricey
“Once people realise they could easily be unable to work as a result of being ill, you then ask the question if they can afford to insure against it. There is a perception that Income Protection is expensive, but there is a huge variety of products available – many of them offering exceptional value for money. There are also options for lowering or managing the cost, such as longer deferment periods,” Jackson explains.
There is also a misconception that employers will continue to provide an income in the event of falling sick. In reality, says Jackson, employees are rarely covered for more than six months before they are moved onto statutory sick pay.
The economic consequences of the pandemic reach even families who felt they were financially secure.
“It is possible for people who are relatively wealthy to experience cash flow problems, especially if money is tied up in assets such as pensions and property. They might be helping their children and also their elderly parents and find things aren’t particularly liquid. One further effect of the current situation may be that more people seek to bolster their personal and household financial security. By speaking to us, we can discuss the options available for protecting themselves and their family in the future. If you become long-term sick and you have no protection in place, it will affect not just you but also anyone that depends on you” Jackson added.
If you are worried about your family’s financial security should the worst happen, or looking for the best ways to manage Income Protection costs, we are here to help. We are a whole of market broker, with access to a wide range of products. Our advice is without charge or obligation and we would be delighted to discuss the options available to you.
Should you wish to discuss in further detail please do not hesitate to contact us. Call 01823 273880 or complete an enquiry form and we will get back to you as soon as possible.