Craig Skelton talks all about income protection.
What is income protection?
Income protection pays out a percentage of your monthly income if you’re unable to work due to illness, accident or disability.
It gives you a buffer to finance yourself without an income, paying the bills and protecting your family’s security. It’s generally a good idea to build an emergency fund, which covers around three months worth of bills and essentials to give you some financial backup.
But income protection insurance can also provide peace of mind.
How does income protection work?
It’s an insurance policy, so you pay a monthly or annual premium for it, like any other type of insurance.
If you can’t work because of sickness, disability or other reasons as stated on your policy criteria, you will receive a regular income until you either return to paid work, retire, pass away, or the policy term comes to an end. We can help you determine how much coverage you will need.
How much does income protection pay?
It could be anything from between 60% to 65% of your pre-tax income. The regular payments, which are tax free, will start after a pre-agreed waiting period, which will be a set number of weeks or months. You’ll pay more in premiums for a shorter waiting period and to receive a higher percentage of your normal income.
This type of protection is different to life insurance or critical illness cover, both of which pay one-off lump sums in the event of your death or diagnosis of a critical illness.
Do I need income protection?
With the rise in the cost of living and cost of borrowing right now, many people are worried about paying the bills should anything happen that leaves them unable to work.
Recent surveys show that the average UK family doesn’t have enough savings to be financially secure for long if they no longer receive their usual income.
That’s where income protection can give you some financial resilience, especially if your workplace does not provide statutory sick pay or if it stops paying out after a certain period of months.
How can I decide what level of protection to buy?
Your advisor can help you navigate the income protection policies that would best suit you and your needs. We’ll help you weigh up how much your premiums might be against the amount of cover that you’re looking for.
As with any insurance policies to do with your life and health, your age, health, occupation and other factors are important. We’ll also explore how much income you would like to receive and how soon you need payments to start, which will influence the cost of your premium.
We can guide you through what type of policy works best, helping you find value for money as well as peace of mind, knowing your income is protected. Your advisor is perfectly placed to help you find an income protection policy to suit your needs and provide security for you and your family.
