If your attitude before the pandemic was that income protection insurance wasn’t for you, it most certainly should no longer be the case. It’s not exactly a cheerful topic, but knowing that you have financial protection in the event of something terrible happening that prevents you from working is the best way to guarantee peace of mind — and to remain cheerful.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Plan in place
Losing your income in the event of an illness or injury is the last thing you should be worrying about during a difficult time. Even if you have sick pay or an emergency fund in place, you don’t want to burn through it all before you’re well enough to return to work. You need to have protection in place to pay your bills because there is no telling what life will throw at you.
Income protection insurance is a long-term insurance policy that will provide financial assistance until you can start working again, retire, die, or until your policy term ends, whichever comes first. Especially during this cost of living crisis, experiencing a sudden loss of income could result in financial ruin, which is why it’s so important to have a protection plan in place.
Often, when thinking about a protection plan, many people might not think about illnesses that take you out of the workforce for an extended period of time. This is why sick pay or an emergency fund just won’t cut it. Some illnesses might extend past the time you’ve allotted for recovery, and some wind up being long-term illnesses that prevent you from returning to work for a long time, and in some cases forever. If you don’t have any way to earn an income, you might end up relying on the state, which could prove difficult and often falls short of what you really need.
But remember, an income protection policy is meant to support you through a difficult financial time, but it will note entirely replace your income. Your payouts will be a portion of your salary and the exact amount will be determined by your provider upon securing coverage.
Especially important if you’re self-employed
For those who are self-employed, very simply, if you don’t work, you don’t earn an income. Income protection for self-employed people might take a little more paperwork to secure a policy, but you can still get protection. You can take out an individual policy, rather than a business one, you just need to find a provider that offers the kind of policy you need.
Since income protection insurance is income-based, you will need to provide your pre-tax share of the gross profit (less trading expenses) for the 12 months immediately preceding the date you became unable to work. Since income for self-employed people tends to fluctuate, some insurers will calculate the payment based on the last three years. Whatever your situation, there’s a provider and policy out there that’s right for you.
Protect your income today
Life is filled with surprises, so enjoy the good ones, but don’t let the bad ones knock you down. To prepare for the possibility of losing your income, make sure you have income protection insurance. To discuss your options and learn what’s right for you, get in contact with the experts at Dental & Medical Financial Services today.