Money Minder UK

Income Protection

Have you considered how you would cope financially in the event that your household loses its main source of income?

How would you support your family?

Unless you have substantial savings to fall back on or a very good long term sick pay arrangement provided by your employer, the chances are you'll find it very difficult to maintain your current standard of living.

  • Income Protection Insurance is designed to pay an income in the event of you being unable work because of an accident or illness.
  • Income Protection Insurance pays out an income NOT a tax free lump sum.

To find out more about how to protect you and your family financially in the event of a main wage earner being unable to work because of an accident or illness, you should use our exclusive online financial research tool, the Finance Navigator.

Whether Income Protection is worthwhile insurance cover for you to have in place or not is dependent entirely on your own circumstances.

If you have a high level of savings in place.....

You may be fortunate enough to have a significant level of savings in place. If so, as long as you are not adverse to the idea of using that money to support your normal day to day living costs, it could be used to meet your income needs in the event of the main wage earner in the house being unable to work.

If your employer provides sick pay benefits.....

Alternatively, your employer may have a very good sick pay arrangement in place that will provide you and your family with enough money to pay the bills and maintain your standard of living for a reasonable time period. If this applies to you, you should investigate how much and for how long you would receive an income form you employer as some employers sick pay plans will pay out for months, whilst others may only pay for weeks or even a few days. In addition, you may also find that the level of income payable would not be enough for your family's needs, in which case complimentary cover may also need to be made.

In both cases, you may only need to worry about what happens when these short term solutions are no longer viable.

If not.......

However, if neither of these situations apply to you, or you are self-employed or run your own business, it is strongly suggested you look further in to Income Protection plans to establish what is needed to provide you with some financial security in the event of you or the main wage earner of the household is unable to work due to an accident or illness.

Putting an appropriate income protection plan in place will provide you with the peace of mind of knowing that income is available for you to live off in the event of it not being forthcoming from your normal means of earning a living because of an accident or illness that was perhaps no fault of your own in the first place.

Our online interactive research tool, the Finance Navigator can help you determine what type and level of cover might be most suitable for you.

The government may provide you with a limited income in the event of you becoming unable to work due to an accident or illness. However, it is important to remember that government based incapacity benefits are not normally high and you may find that these benefits are not actually enough money for you and your family to live on. Without extra income, it is very possible that you may find it very difficult to maintain your previous standard of living if you relied solely on state benefits.

  • If you are employed and earning on average over £109 per week, in the event of you being unable to work because of an accident or illness, you are likely to be entitled to Statutory Sick Pay (SSP).
  • SSP is just £86.70 (from day 4 of your time off for up to a maximum payment period of 28 weeks).
  • After 28 weeks (or in some cases sooner) when Statutory Sick Pay comes to an end, you may then be able to claim Employment and Support Allowance (ESA).
  • ESA benefits are dependent entirely on eligibility and your own circumstances and could provide between £56.80 and £105.05 a week.
  • Neither benefit is "earnings-related" so the more you earn, the more likely you are to really notice the shortfall in your income.

If you're concerned about how you'd cope financially in the event of a loss of income to your household you can look at the potential solutions by using our exclusive interactive financial research tool the Finance Navigator.

By asking you targeted questions it will help you to find out more about the solutions available for meeting your needs, allowing you to consider what action to take.

When setting up an income protection plan it is important to know what occupation cover is being provided and what definition of 'unable to work' is being used by the insurer.

This can be divided into three main categories:

  • Own Occupation - Unable to do your own job
  • Suited Occupation - Unable to do your own job or a similar one for which you are qualified
  • Any Occupation - Unable to do any kind of paid work

The best option to go for here is 'own occupation' as this means that subject to a valid claim your inability to carry out your normal day to day job triggers payment.

'Suited Occupation' means that you need to be prepared to accept the fact that even if you had a valid claim, if it is possible for you to continue to work in some way in a job that you have relevant skills and experience in place for, the insurer may not pay any benefits. Therefore you may have to take on a less pleasant job if you became unable to do your current job.

'Any Occupation' means that you have to be physically unable to do any job before you will receive benefits form your plan and whilst this can often be the cheapest option, you run the risk of paying for a plan that, even if you find yourself suffering with a long term sickness or disability, may never pay the benefits that you had hoped it was going to.

If you're concerned about being unable to continue in your current job in the event of a long term accident or illness, you can find out more about how to provide yourself with the peace of mind you are looking for by using our exclusive online financial research tool, the Finance Navigator.

By asking you targeted questions it will help you to find out more about the solutions available for meeting your needs, allowing you to consider what to look at in more depth.

A typical list of exclusions might be as follows:

  • Pre existing medical conditions
  • Normal pregnancy
  • Incapacity caused by War
  • Self-inflicted injury
  • Criminal acts
  • Misuse of alcohol or drugs

To find out more about the solutions available to protect your income in the event of being unable to work because of an accident or illness, use our exclusive interactive financial research tool the Finance Navigator.

By asking you targeted questions it will help you to find out more about the solutions available for meeting your needs, allowing you to consider what to look at in more depth.