Income Protection – undersold but very valuable
Moving into a new home often means entering into a long term financial commitment. Protection policies are often disregarded when buying a new property but it is important to know what you need, why you need it, and where to buy it.
Being suitably insured allows you to gain some peace of mind; knowing your debts are covered and loved ones are cared for in the event of an unexpected situation. There shouldn’t now be any unexpected tax bills because, having completed trust forms, the money will go to the right place should the worst happen.
What happens if you experience life changing illness or injury instead? AIG’s 2017 Claims Statistics were released last month, showing that, once again, the top reasons for Critical Illness claims were for cancer, heart attack or stroke. What it also showed was that the average age of Critical Illness claimants is 47. If we consider cancer in isolation, 1 in 2 people in the UK are now likely to develop cancer at some point in their lives, according to Cancer Research UK. They go on to say the UK’s survival rate has doubled over the last 40 years and around half of patients now survive the disease for more than 10 years. This could impact our ability to continue working as we did and subsequently affect our income and lifestyle.
There’s a significant difference between death and ill health, and that’s why we shouldn’t look at mortgage protection cover in isolation…“we are living longer, but we are not living healthier”. Put simply, lump sum Life and Critical Illness cover are not enough.
According to the ABI, 1 million workers a year find themselves unable to work due to serious illness or injury. If we look at the claims experience for Income Protection policies across providers, it would be of no surprise to see mental health, musculoskeletal and cancer risks being significant reasons for claims. However, it’s surprising to see that over 1 million Life Cover policies are sold every year compared with just over 100,000 Income Protection policies (barely a 10th of the Life market).
Furthermore, insurance products are evolving; support is being given to the customer to promote recovery and speed up the time taken to return to work. More and more Rehabilitation Support is being offered during the deferred period, so that customers can be helped when they need it most. Additional built-in features can add a wide dimension to the cover, these include:
- £100 per night for up to 90 days in hospital;
- £1,500 monthly Carer Benefit for up to 12 months to care for a seriously ill spouse or child;
- Trauma benefit pays 6 x the monthly benefit as a lump sum up to £50,000 if the customer suffers one of six traumatic illnesses or conditions.
Income Protection policies have changed rapidly and are now extremely valuable products. This may all sound very expensive but that isn’t necessarily the case as there are plenty of affordable Income Protection policies out there which don’t compromise quality for price!
In conclusion, Income Protection certainly has its purpose when protection planning. The product features are diverse and go beyond the claim itself, and good quality protection can be offered at an affordable price. If this has provided a pause for thought please give us a call . . . we’d like to help.