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The State Won't Save You..

Forgive the dramatic title, but this is a subject I feel extremely passionate about. Have you ever thought about what might happen if you were off work for an extended period of time? You might fall ill, suffer a serious illness and need to take a year off or have an accident, slip or trip and suffer injuries that remove your capacity to work.

A lot of employers offer a generous sick-pay scheme to employees, but do you know how much of your salary you get and for how long? It might be 4 weeks, 3 months, or in some circumstances, it will be statutory sick pay only. What if you needed 12 or 18 months off? How would you and your family cope financially?

Statutory sick pay currently stands at £109.40 per week, paid by your employer for a period of 28 weeks. That equates to around £474 a month. Could you and your family survive? I’ve drawn up an example of some household costs below, based on 2 adults and 2 children;

Mortgage/Rent = £1200

Council Tax = £200

Gas/Elec/Water = £250

Food/Drink/Clothes = £400

Phones/Broadband/TV = £100

School Costs/Childcare = £450

Total = £2600

If one adult was to be off work for a substantial amount of time, the above would become very difficult to cover on one wage. This could lead to financial difficulties, stress, further illness, credit file issues and potentially the loss of the family home in the worst cases.

For the self-employed, statutory sick pay doesn’t apply, so there is an even greater need for private, self-funded financial protection provisions to ensure bills and living expenses can be covered.

So, what sort of life insurance covers income? Income Protection. Once accepted by a provider, it’s like your own personal sick-pay policy that no one can take away. There are various different ways your policy can be setup, but the benefits are paid tax-free (if paid for by you as an individual).

Once the provider has accepted your claim, the policy will start to pay an amount of money every month, after your set deferred period. The longer the deferred period, the cheaper the cover. The amount you can claim is normally restricted to 50-60% of your gross annual income, paid on a monthly basis. The policy can pay out indefinitely until retirement if you can never return to work, for 12 months, 24 or even 60 in some cases. Where there is a limited benefit period (12 or 24 months for example), the policy can pay-out on multiple occasions until retirement.

So, if you took out a full-term income protection plan that paid £2000 a month at age 30, the plan could pay out a maximum of £912,000 (assuming retirement at age 69).

More information can be found on our website ( and we offer no-obligation consultations on all types of protection.

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