No one expects to be out of work due to illness or injury, but it happens. When it does, your bills won’t wait. Statutory Sick Pay (SSP) is available, but it’s limited to just £116.75 per week at the time of writing, and only for up to 28 weeks. That’s unlikely to cover rent or mortgage payments, not to mention all the utilities.
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Some employers offer enhanced sick pay, but this varies. Being self-employed incurs even greater risk as you don’t even have SSP to fall back on. This is where income protection helps bridge the gap by paying a portion of your salary if you can’t work.
Let’s look closer at the importance of income protection and how it works.
Income protection insurance works by providing a regular payout if illness or injury stops you from working. Policies typically cover up to 70% of your income, ensuring you can still meet financial commitments while recovering.
Payments only begin after a waiting period, which you’d select when taking out the policy. In general, the longer the waiting period, the cheaper the policy. If you have enough savings to cover a few months, you can opt for a longer waiting period and reduce your premiums.
Even with income protection, financial resilience starts with savings, so we recommend setting aside three to six months’ worth of expenses in an emergency fund. This gives you breathing room before insurance payments begin and reduces the cost of your policy.
Without this buffer, you may struggle to cover immediate costs, even with income protection in place. However, relying solely on savings isn’t always practical as recovery from serious illness or injury can take longer than expected, and you may find yourself helplessly watching your emergency funds deplete quickly.
Income protection isn’t just for individuals as employers can take out group policies to cover their staff. This can be an extremely valuable workplace benefit, helping employees feel secure while reducing financial stress during sick leave.
A strong benefits package including income protection can also improve staff retention and morale. Employees who feel supported are more likely to remain loyal, reducing recruitment costs in the long run.
Illness and injury don’t discriminate. Office workers can develop chronic back problems from years of sitting, while stress and mental health-related absences have risen sharply in recent years. Accidents can happen anywhere, from the workplace to home and everywhere in between.
It is all too easy to underestimate the financial impact of extended time off work. If it happens without an income protection plan in place, you could face difficult choices like taking on debt, cutting essential expenses, or even relying on your family for support. Income protection provides stability and peace of mind, ensuring that a temporary setback doesn’t become a long-term financial crisis.
If you want to learn more about income protection in the event of being unable to work, get in touch with Integritas Financial Planners today.
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