During the cost-of-living crisis, money and finances are at the forefront of all of our minds, something which income protection insurance can help to alleviate.
But what isincome protection insurance? What makes it so beneficial? And, is it worth it despite the cost of living crisis? Let’s discuss.
What is income protection insurance?
Put simply, income protection insurance does exactly what it says on the tin – it protects your income in the event of illness or injury. If you were to become ill or have an accident, and are unable to work because of this, income protection insurance will pay out regular payments – usually around 50% to 65% of your income – until you can return to work.
The illnesses covered will depend on the policy at hand, but it usually covers most short- and long-term illnesses. That said, it all depends on how the policy maker defines what can make someone unable to work.
Income protection insurance is available either as an individual policy, or through your employer as part of your employee benefits. Due to the number of policies, group income protection is typically cheaper per head, and it can be taken straight out of employees pay checks or offered free as a workplace reward.
As such, income protection insurance will provide you with regular payments throughout your illness, supplementing missed income. The payments will cease once you either return to work, retire, or unfortunately pass away, depending on which event happens first.
How can income protection insurance help during the cost-of-living crisis?
The UK is currently in the midst of a cost of living crisis, with inflation rate at a record high, and energy bills skyrocketing. Due to this, and the lasting after effects of the coronavirus pandemic, many people are no doubt more worried about their finances than ever before.
In fact, one survey found that 44% of participants were anxious – and 41% worried – about their financial situation in the month prior alone. This percentage increases further when you isolate Millennials and Gen Zers. Of those aged 18 to 45, 55% report being anxious, 48% worried, and 33% angry about their finances.
When you have regular financial obligations such as rent, mortgage payments, and utility bills, the thought of unforeseen illness causing you to be unable to work can be daunting. This anxiety can be bolstered further if you have any dependants, are self-employed or a contract or freelance worker, or you are not eligible for statutory sick pay.
Coupled with the current economy, considering that inflation, rent, and energy prices are the highest on record, ensuring regular income is even more important for financial stability and peace of mind.
That said, as many households are looking to cut down their monthly expenses and tighten their purse strings, income protection insurance might be seen as an unnecessary expense. Though it is indeed an expense, these small payments every month can go a long way to ensuring long term stability throughout the cost-of-living crisis.
Income protection insurance can provide a much-needed safety net in the unfortunate event of an accident or illness, providing you with a bit more financial security in such unstable and unpredictable times.