Created 25th April 2022

Many of us will insure a mobile phone, the contents of our homes, or an overseas holiday with barely a second thought, simply accepting it as one of the costs of life’s necessities. However, when it comes to protecting their monthly income most people either don’t know it can be insured or decide against it.

Some customers avoid taking out income protection insurance because the monthly costs can seem expensive compared to other personal insurance premiums.

Since the pandemic, products like income protection, critical illness and life insurance have become more important to have as many people have experienced reduced income due to furlough, redundancy or self-employment wages drying up. The Office of National Statistics noted that in 2020 people aged 25 to 34 had average savings of £3,544, which increases to £5,995 for those between 35 and 44. In the same year, the average monthly household budget was £2,548 according to personal finance advisor NimbleFins, suggesting that if you became injured or unwell enough to work, you would have between one-two months before you began experiencing financial difficulty. Having a safety net like income protection in place can secure your future should the unexpected happen.

Although incredibly useful protection, without expert advice these insurances may be difficult to understand. Bradley Hall’s expert mortgage team are here to help you navigate your way through any income protection uncertainties that may have prevented you from protecting yourself previously.

What does income protection cover?

Income protection insurance, also referred to as income replacement, protects your monthly income if you can no longer work due to a serious injury or illness. This protective cover differs from life insurance as it safeguards you and your loved ones whilst you are still alive, but are unable to work and therefore facing financial hardship.

How much does it cost?

There are several factors that affect the premium when looking at income protection such as age, smoker status and health, occupation, lifestyle, and hobbies, to name a few. There are options to reduce how long the pay-out would be made for, or to increase what is known as the payment deferment period. The payment deferment period is the time between the accident or illness occurring and payments starting to be made. Although, the payments may be deferred, often those who have income protection cover are given access to benefits while they wait for this.

If you are interested in income protection but are apprehensive about the costs, there are methods that can keep you protected without breaking the bank. Controlling your cost can be achieved through only insuring yourself and larger bills, such as your mortgage and essential living costs. Similarly, when working on the basis that you can’t go to work, you are more likely to be able to cut back on more discretionary spending such as meals out, holidays and transport, ultimately funds can be saved here also.

Is Income Protection necessary?

Not having this type of cover in place could leave you without a sufficient safety net to cover household bills and larger expenses like the mortgage or rent, therefore looking into this type of protection is strongly suggested.

According to the Association of British Insurers’ Welfare Reform report, one million workers find themselves unable to work due to serious injury and illness every year. As well as around 250,000 people leaving employment each year as a result of ill health. These figures equate to around one per cent of the population, with 60 per cent being the breadwinner of the household, all of which could have been prevented with the correct protection in place.

How long should an income protection policy last?

It is important to bear in mind that the longer the policy runs for, the greater protection that affords you and your family should you become incapacitated. However, in an ideal world, protection insurance policies should run up to the individuals expected retirement age.

The importance of income protection has never been as highlighted due to the catastrophic effect the pandemic has had on many people’s incomes. However, income protection insurance is not an easy product to quickly compare and getting the best deal often requires advice and guidance. If this assistance is not given, issues could occur with several factors including being over or under protected. Talking to an expert with experience of providing the right protection based on an individual needs can be invaluable.

Bradley Hall’s Mortgage team have access to bespoke deals and guidance to suit you.

For more information, please contact mortgages@bradleyhall.co.uk or call 0191 383 9999

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