What would happen if you were off work for week? A reduced income may be paid in the form of statutory sick pay (SSP), or you might receive your full salary if your employer is generous. If you're self-employed you can't claim SSP or company sick pay from someone else.
What if you were signed off work for 3 months?
How about 2 years? The remainder of your career?
Just how long could you survive financially?
These are not scare tactics - these are simple questions about which too many people don't think until it's too late.
Too late might be when you've been unable to work for 3 months, your contractual sick pay period is ending, your savings fund has run dry and you now have to survive on state benefits.
Too late might be when you approach retirement and are more likely to need time off work for health reasons.
Too late could be when you are diagnosed with a medical condition which limits the work you can do, and therefore your retirement plan has to change.
Protect Yourself
Some ways people are protected against this are : a) Having a very affluent family who could and would replace your lost income if you can't work; b) having enough cash available to pay yourself an income similar to that which you earn now; or c) by taking out an insurance policy so your household income remains at a similar level even if you have to leave your job due to illness or disability.
a) A minority of people are fortunate to be in this group, and insurance may or may not be right for them;
b) Do you have enough cash to survive until retirement?
c) This last option seems like it could be expensive, doesn't it?
Well, c) isn't necessarily expensive - it all depends on the risk of you making a claim. A 65-year old smoker working as an explosives operative with severe back problems is likely to be uninsurable.
For most people who don't work in high-risk jobs, or who aren't already suffering serious illnesses income protection is a sensible and affordable way of making sure that the household income could still be received every month.
What is it worth to you?
So what is that level of cover worth to you? £10/month? £25/month? £50/month. Or look at it another way - 1% of your salary? 3% of your salary?
It may surprise you to know that for a lot of people, it ought not to be a million miles away from these figures. Of course, as I mentioned earlier, the higher your risk, the less of a good deal you might find.
The irony is, as with most forms of insurance, that the more you are in need of cover, the more expensive it is likely to be. Those in their late teens/early twenties will often not see the point in spending, let's say for example, £15/month for the next 45 years, as they feel the likelihood of a claim is so low it is worth the risk. Conversely, if you were to ask people in their fifties who have had to change occupations due to health or illness if they would have taken such a policy when they were twenty, what do you think those people would say? Chances are, they would wish they had taken out such a policy earlier.
Many people think they don't need insurance until it is too late. Here is part of a famous Winston Churchill quote:
"If
I had my way, I would write the word "insure" upon the door
of every cottage and upon the blotting book of every public man,
because I am convinced, for sacrifices so small, families and estates
can be protected against catastrophes which would otherwise smash
them up forever"
Maybe it would be sensible to speak to your financial adviser to find out what it would cost you to protect your income?
