Always check this one thing on your work contracts
When you’re starting a new job, it’s easy to get caught up in the hustle and bustle of things, forgetting to give your work contract a good read through.
But checking your work contract for things like sick pay should be your top priority, when starting at a new company or if you’re starting a new role with a new contract.
For those who don’t get full sick pay provided by their employer, an income protection policy should definitely be on your radar, keep reading to find out why…
What is income protection insurance?
Also known as ‘sick pay insurance’, income protection is one of the most important types of life insurance you can get. Having this cover in place means that the money you earn is protected.
The way it works is, each month you’ll pay a monthly premium (which is the norm for any type of life insurance policy), then, in return, your policy will cover up to 70% of your income, if you were to become ill or injured and unable to work as a result*.
Why you can’t rely on SSP
Statutory sick pay (SSP) is a type of sick pay that’s paid by your employer. If you qualify, you’ll receive a pay-out of £109.40 a week, for up to 28 weeks.
Although SSP typically increases slightly every year, it’s still not enough. According to the Office for National Statistics, the average weekly household outgoings in the UK are £481.50 which means that on average, weekly SSP payments would cover just 22% of the average cost to run a home.
In what ways is income protection superior to SSP?
Firstly, unlike SSP, where once the 28 weeks are over the weekly payments will end, income protection can continue to pay-out until your policy ends or you're ready to return to work (whichever comes first)*.
One of the biggest advantages of having an income protection policy in place is that it can pay-out multiple times. For example, say you had to take time off work after being diagnosed with a mental illness and you successfully claimed your income protection policy. But later down the line, after returning to work, you began to suffer again, you may be able to claim again on your cover.
Lastly, with an income protection policy in place, you can benefit from peace of mind, knowing that you’d have an additional stream of income, if illness or injury were to suddenly stop you from working.
Income protection vs critical illness insurance
Critical illness cover is another one of the most popular life insurance policies you can get. But it’s a little bit different from income protection, and if you’re looking into life insurance, it’s important that you know the difference between the two.
Critical illness insurance would cover you for a list of defined critical illnesses, which means that if you sadly were diagnosed with one of these illnesses, your cover could pay-out a tax free lump sum.
Income protection is different in the sense that, instead of covering you for a defined list of illnesses, it could cover you for illness and injury in general. This is one of the reasons why income protection is more widely considered a more comprehensive life insurance policy than critical illness cover.
What is the main difference between these two policies?
We won’t stray too much from income protection in this blog but let’s talk a little bit about the main distinction between these two popular policies.
The main difference you’ll need to know about is the way these policies pay out. An income protection policy will pay-out in smaller monthly bursts whereas a critical illness policy will pay-out in one lump sum.
Whatever type of pay-out you think could benefit you the most, if times ever get tough, will be a big indicator of which type of policy you should choose. Plus, with help from a life insurance broker (like us), your decision will be backed by advice from experts.
Is income protection worth it?
Although the thought of being off work for a long period of time seems far-fetched, looking at the data from the Office of National Statistics, in 2022, 2.5 million people were off work with long term sickness.
The reality is, no one knows what’s around the corner, and sometimes illness strikes when we least expect it, there’s no stopping it. But one thing you can do is be prepared and having an income protection policy ensures that you have a financial safety net, if you were to suddenly become ill or injured.
Young adults - listen up!
It’s hard enough navigating the twists and turns of life as a young adult but if life throws a curveball your way and you can't work as normal, you could end up struggling financially. There’s a common misconception that life insurance isn’t for young adults but this couldn’t be further from the truth.
Not only will your life insurance premiums be cheaper, the younger you are, but you can get policies to cover your mortgage, your monthly wage, and cover to financially protect you against becoming critically ill.
Sadly, illness doesn’t discriminate - you can fall ill at any age, so the best way to give yourself and your family peace of mind is through sorting your life insurance cover.
Do you need income protection if you’re self-employed?
Income protection is a borderline necessity for those who are self-employed.
When you’re self-employed, you don’t have some of the same benefits as those in traditional employment, such as; paid holidays, company sick pay, or even statutory sick pay (SSP).
Essentially, when you’re your own boss, you have to be self-sufficient (particularly in the early stages), and having to take time out of work due to illness or injury isn’t in anyone's plan.
But with an income protection policy in place, you’d at least be able to pay for the essentials whilst you’re unable to work, meaning you can focus on your recovery and get back to building your own empire.
Is income protection taxable?
If you suddenly became ill or injured and weren’t able to work as normal, your income protection policy would start paying out, after your deferral period. These monthly pay-outs from your income protection policy would be tax-free.
Why choose us?
By searching through the UK’s leading life insurance companies, we can help you take out the right life insurance policy that’s suited to you and your loved ones.
When you choose Caspian, you’re not just choosing the best life insurance for you, you’re also choosing award-winning customer service, an in-house trust team, and dedicated claims support. To kickstart your life insurance journey with us, click the button below today.
*Your policy will pay you a monthly amount until you return to work, your policy ends or you have reached your pre-chosen maximum claim period.
