This week (20-24 September) is Income Protection Awareness Week, a chance to spread the message about the importance of having an income safety net.
Although insurance might not be many people’s idea of fun, failing to consider how you will be protected in the event of lost income can cause devastating financial effects. Income protection insurance can -provide much needed support should you find yourself unable to work.
A year of turbulence
When COVID-19 struck in March 2020, millions of people in the UK opened their eyes to the life-altering impact of sudden changes in health. Sadly, unpredictable health events are a reality in ‘normal’ times too.
Since the start of the pandemic, the Job Retention Scheme has paid a portion of 11.6 million workers’ wages – a lifeline for many, but what about when ill health stops an individual from working?
Peace of mind
Income protection insurance offers a financial safety net for people unable to work because they’ve had an accident or fallen sick. Policies will pay an agreed proportion of your monthly income; generally, the amount received will be between a half and two thirds of your gross annual salary.
Surprising decline?
In a year when COVID-19 has shown just how unpredictable matters of health can be, it might seem strange that the number of people taking out protection insurance policies has fallen. Income protection saw 2.16 million sales in the UK in 2020, a 1.2% drop compared to the previous year.
Jo Miller, Co-Chairwoman of the Income Protection Task Force (IPTF), thinks the decline is “disappointing, but perhaps understandable in the context of a pandemic.” Looking ahead, however, she believes COVID-19 will concentrate minds on the importance of protection, “The need to protect incomes in the face of unexpected events has never been easier to demonstrate to clients.”
All-round protection
5.8 million UK adults have thought about or taken out a life insurance policy since the beginning of the pandemic, according to Canada Life. This is a valuable form of protection, but it is important to realise that life insurance does not provide the same cover as income protection insurance.
Worryingly, research as shown that consumers with life insurance were not interested in income protection insurance. Life insurance is usually paid as a lump sum after a person passes away, whereas income protection provides help in the here and now, by paying out a monthly sum to cover lost earnings.
Time to act
IPTF Co-Chairwoman Katie Crook-Davies commented: “The time to act is now and we hope that this week, dedicated to income protection, will provide a refreshed outlook and new energy around income protection.”
Income Protection Awareness Week involves a series of live, free to view, online events, case studies, and shareable material. The campaign hashtag is #LetsTalkIP.
If you would like expert guidance and advice, contact your Sandringham Advising Partner.
Sources:
https://www.bbc.co.uk/news/business-58498433
https://www.citizensadvice.org.uk/consumer/insurance/insurance/income-protection-insurance/
https://www.ftadviser.com/protection/2021/06/25/advisers-lack-of-ip-awareness-embarrassing/
https://iptf.co.uk/income-protection-awareness-week/ipaw-blogs-and-articles/
https://www.bestpricefs.co.uk/blog/income-protection-insurance-life-insurance/