With the current demands on our disposable income, imagine what would happen if a wage earner then experienced reduced earnings from being off work long-term due to an illness, or injury. Could they survive financially?
If you found yourself in this position, some may initially benefit from financial support from their employer. However, it’s only likely to be there for a defined period. Plus, there’s limited state support to access, with Statutory Sick Pay at around £100 a week.
However, will that be anywhere near enough to ensure you can continue to put food on the table and a roof over your head (via continued mortgage or rental payments) – and that’s just for starters.
Average lifetime earnings
Consider this; across a working lifetime, taking the average annual income of around £32,000, this could equate to about £1,500,000 (discounting inflation). This amount is well over five times the current average value of a UK home – circa £270,000.
Yet many will willingly insure their home, and sensibly take out life cover to help pay off the outstanding mortgage (as a minimum), but far fewer apply the same principles to their own income stream.
(Sources: Office for National Statistics, Labour market overview, October 2022 release; Nationwide, House Price Index, October 2022)
Could it happen to me?
Most of us will feel that being off work long-term, and unable to earn an income is unlikely. Yet almost 2.5 million people in the UK, are currently off work due to long-term sickness, equating to around 1 in 10 of those in full-time employment.
(Source: Office for National Statistics, Labour market overview, October 2022 release)
A solution for you…
If you did find yourself in this position, then there is a protection product to utilise once any employer support, or savings, drops away, and that’s an Income Protection policy.
Income Protection is a flexible product, and will generally cover up to around 60-65% of your gross income, and dependent on the type of product you opt for, it could be a tax-free monthly payout until you’re well enough to return to work, retired or have died, whichever occurs first. And, if you’re still working and paying premiums, you can claim against it more than once.
The product also allows you to defer payouts until you really need them (which could be for up to 52 weeks). The longer you opt to defer, then that will be reflected in a lower premium.
Alternatively, if an even lower monthly premium is better for your pocket, then you could opt for a scheme that only pays out for a specific period of time, generally one to two years (although it can be up to five, in some instances).
As with all insurance policies, terms, conditions and exclusions will apply.