Income Protection

The facts from Stirling House Independent Financial Advisers www.stirlinghouseessex.co.uk

Income Protection is designed to replace lost earnings. Income Protection should be reviewed as a high priority for most people.

Income Protection can be arranged to compliment any employer benefits sick pay that you may have.

Prior to arranging an Income Protection policy, you should investigate what your employer would provide in the event that you could not work due to poor health. For many employers the cost of providing long term sick benefits or Income Protection itself for employees is too expensive.

For many employed individual Income Protection is a must; as employer benefits are likely to be limited.

For the self employed Income Protection is even more critical as other than the benefits arranged by the individual, there are no other benefits.

Sole traders are unlikely to receive statutory sick pay, (please see 'The-facts what the state provides').

Income Protection is most commonly arranged on an own occupation basis.

This means that the insurer will pay benefit if you are unable to under take the tasks associated with your occupation. This means that there is a very wide scope of health conditions that could potentially give rise to a successful claim.

Income Protection providers can therefore cover conditions such as bad back or stress, which wouldn't be covered from other policy types.

Income Protection also covers you in the event of an accident, even in the workplace or on the road.

How much does Income Protection cost?

Income Protection is individually priced based on a number of criteria:-

• Amount of Cover required
• Term
• Age of inception
• Gender
• Smoker status
• Deferral period (how long you wait until cover is paid)

Some (but not all) Income Protection providers may also ask details of your occupation; to asses the potential risks associated with your occupation.

Income Protection cast study

Mr S

Carpenter aged 32

Annual earnings £28,000

Currently Mr S does not have any Income Protection in place.

He has a mortgage that costs £750.00 per month.

Mr S is self-employed or a sub-contractor and therefore doesn't get any employer benefits (sick pay) or employer sponsored Income Protection.

Mr S met with a Stirling House Independent Financial Adviser and as part of a financial review arranged an Income Protection policy with Cirencester Friendly Society at a cost of £42.00 per month. Benefit provided until age 65 which would increase in line with the state retirement age.

Weekly benefit £270.00 tax free, paid after 1 week of illness or injury, this worked out to be only £285.00 less per month than Mr S' take home pay (once he had paid his tax) and was enough to cover his:-

• Mortgage
• Insurance
• Council Tax
• Utilities
• Food
• Sky/phone and broadband

Without this cover, he would not be able to pay any of his bills.

This policy also has a small investment value.

Mr S was very happy with the Income Protection policy and the advice that he received, he was happy to refer his adviser to a colleague and a fellow member of the football team that Mr S plays for.

Income Protection case study provided for reference and information purposes only, specific and individual advice required.