[AD] Is income protection worth it?
Income protection might not be the most-well known of insurance products, but the recent pandemic has certainly meant a rise in people looking into it. This is because more and more people are being made aware of the financial vulnerabilities they’re living with. Whether you already know a bit about income protection or you’re a total newbie, this post will help you work out whether it’s the kind of cover that might be worth it for you.
What exactly is income protection – and what’s it for?
Put simply: income protection is an insurance policy that pays out monthly if you’re unable to work for medical reasons. This could be anything physical or mental, illness or injury – from chronic back pain to depression, and from serious injuries to serious illnesses like cancer, heart attack or stroke. These are the kinds of things typically claimed for.
If you have income protection, your insurer will pay out for any medical reason that leaves you incapable of working, if you’re signed off by a doctor. The point of this kind of insurance is to protect you financially if you lose your income for medical reasons, particularly if it ends up being for a long time and you run out of other ways to support yourself financially – like sick pay or personal savings.
What’s the risk if you don’t have income protection?
The risk of not having income protection is not being able to keep up with the cost of life if you can’t work. For some people, this scenario could be financially catastrophic, depending on your circumstances and how long you end up being off work – but the level of risk will always be different from person to person.
If you’re self-employed, the risk might be even higher – or you might be quicker to be financially affected than someone else (because you don’t have sick pay). Ultimately, the risk depends on what financial commitments you have and what the consequences would be, on you and your loved ones, if you weren’t able to keep up with them.
How to work out if income protection is worth it for you
The main thing to think about, as mentioned above, is whether you have any commitments or people who’d be affected if you lost your income. You might also weigh up how likely it is to happen to you (the chances of which are usually higher than people think). A good rule of thumb is to think about how long you could last without an income before needing extra financial support. This guide will help you understand more about the ins-and-outs of income protection – including a list of questions to ask yourself to help you work out if you need it.
Having any kind of insurance in place is about having peace of mind in case something bad happens. In the case of income protection, it’s about having a financial cushion in case you become too ill or injured to work for a long time. How much you need that cushion is down to your individual circumstances, and how much being off work could affect you financially – and deciding whether or not income protection is ‘worth it’ for you may simply about how much you want and need that peace of mind.
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