This is a question that perhaps more people should ask themselves.
According to Gov.uk some 300,000 UK workers fall into the welfare system each year because of health-related issues, with those on long-term sick leave missing out on £4 billion a year in lost earnings.
And the welfare system doesn’t entirely bridge the gap. Post-recession it is no surprise to find that the purse strings of the treasury are much tighter than they have been in the past, with state benefits Statutory Sick Pay (SSP) and Employment and Support Allowance (ESA) no exception to this.
For example, an employee unable to work due to illness or injury is entitled to SSP from their employer after three days of absence from work and can claim SSP of £88.45* per week (£353.80 per month) for a maximum of 28 weeks.
For those who are self-employed, the situation is even worse. They don’t qualify for SSP at all but instead can apply for ESA (provided their N.I contributions are up-to-date) at a level of £73.10* per week (£292.40 per month).
Apart from the onerous application process and a degree of qualification that the state can use to determine if someone really isn’t fit enough to work, the resulting drop in income is never going to reflect the lifestyle most people have worked hard to achieve. For most working people it is simply incomprehensible to be expected to maintain our standards of living on these low sums.
No wonder that UK consumer association Which describes income protection as being “the one protection policy every working adult in the UK needs is the very one most of us don’t have.”
WHAT IS INCOME PROTECTION?
Income protection provides people with a regular income should they be off work due to injury or illness, an income that helps pay the bills and removes potential financial worries during recovery.
According to research by Unum and Personnel Today, just 12% of employers support their staff for more than a year if they're off sick from work. And when Which asked the public, just 9% said they have some form of income protection, compared with 41% who have life insurance and 16% who have private medical insurance.
One industry survey showed less than a quarter of people deemed protecting their income to be essential, compared with 74% who said the same of needing access to broadband internet.
SO WHY DON’T MORE PEOPLE HAVE IT?
It’s interesting to reflect on what it is that stops people from protecting their income.
Firstly it seems that there is much confusion and cynicism surrounding income protection, much of which harks back to bad press around the mis-selling of Payment Protection Insurance (PPI) and a lack of trust for financial institutions in general. This shouldn’t be an issue as income protection has a good track record of paying out claims and claim paid rates are often well above 90%.
Then there’s cost of cover, which can appear as a barrier. However, the mistake often made here is to automatically look to put as much cover in place as possible without first considering the cover actually needed. Minimal state benefits contribute and, of course, the lifestyle of anyone who is seriously ill often changes, making it unlikely that many of us would actually need the maximum level of cover available.
INCOME PROTECTION PLUS FROM PG MUTUAL
PG Mutual aim to protect individuals, families and staff with an affordable plan for those times when it is needed most - a financial safety net for anyone who works hard to create a lifestyle.
Income Protection PLUS helps with the payment of a regular income from the first day of ill health or injury until the age of 65 (or until return to work) and includes an investment element which pays out at maturity of the policy. Plus, it comes with a range of fantastic member benefits giving access to discounts, cashbacks and offers on popular brands and services. For convenience the plan is customisable and can be reviewed at any given time, paying an income at an affordable price for as long as is required.
So, isn’t it time you considered your back-up plan?
As a member of AIA, you are entitled to a 20% discount off your first two years' cover^. To obtain a no obligation quotation, use this link www.pgmutual.co.uk/quotation. Remember to use ‘AIA’ in the discount code.
*DWP, August 2016
^For full Terms and Conditions, visit www.pgmutual.co.uk. PG Mutual is the trading name of Pharmaceutical and General Provident Society Ltd. Registered office: 11 Parkway, Porters Wood, St Albans, Hertfordshire AL3 6PA. Incorporated in the United Kingdom under the Friendly Societies Act 1992, Registered Number 462F. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority, Firm Reference Number 110023.