Most of us wouldn’t dream of leaving our home or car uninsured. Yet, many people overlook something even more important – their income. During Income Protection Action Week, we want to highlight just how crucial it is to have the right safety net in place should the unexpected happen.
In our latest Citrus Insights video, Richard Harris interviews Julie Thompson, Protection Propositions Manager at Scottish Widows. With over 15 years of experience in protection, Julie shares her expertise on income protection – a product often misunderstood and underappreciated.
What Is Income Protection?
Income protection is an insurance policy designed to replace a portion of your income if you are unable to work due to illness or injury. Unlike life insurance or critical illness cover, which typically pay out a lump sum, income protection provides a monthly benefit to help you cover your bills until you can get back on your feet.
As Julie points out, income protection is not an unemployment benefit – it kicks in when you can’t work due to health reasons, not redundancy. The peace of mind this provides can make all the difference in uncertain times.
Who Needs Income Protection?
Julie emphasizes that income protection is universally beneficial for most working-age individuals, from young professionals renting their first apartment to self-employed workers who have no sick pay to fall back on.
Standard Statutory Sick Pay (SSP) in the UK is just £116.75 per week for up to 28 weeks*, which isn’t nearly enough for most people to live on. This makes income protection particularly valuable for those with limited safety nets, like freelancers or those without significant savings.
Misconceptions: Cost and Claims
One of the most common myths about income protection is the cost. Many assume it’s expensive, but according to research by The Exeter, the reality is that the average premium is £24 per month for a two-year limited benefit term**. There are also ways to adjust the policy to suit your budget, such as extending the waiting period before benefits kick in.
Another misconception is that insurers don’t want to pay out. However, according to data from the Association of British Insurers (ABI), more than 80% of income protection claims were paid in 2023***, proving that the majority of claims are honoured.
How to Choose the Right Policy
Selecting the right policy can seem daunting, but there are key factors to consider:
- Income level: How much you were earning before being unable to work will determine your benefits.
- Savings: Consider how long your savings would last if you were unable to work.
- Sick pay: What does your employer offer? If it’s minimal or nonexistent, income protection can fill that gap.
- Added-value services: Many policies now include benefits like 24/7 GP access, mental health support, and physiotherapy, which can help you recover faster and return to work.
Learn more by watching our full interview with Julie Thompson and start taking steps to secure your financial future today!
* https://www.gov.uk/statutory-sick-pay
** The Exeter
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