Income protection Case Study
Income protection Case Study
Income protection plans are a type of insurance policy that guarantee financial cover during periods of no income.
There are various reasons why you might need income protection, for example, if you are unwell and unable to work then you could rely on income protection to pay your rent/mortgage /bills etc.
Similarly, you can also benefit from income protection if you need to retire but can’t afford to yet. An income protection policy isn’t only for unforeseen circumstances, but is also useful for anyone who might not be able to financially support themselves for a short period of time.
Russell’s Income Protection Case Study
The following is based on experiences from our clients.
Russell is a self-employed carpenter and is the main financial provider for his wife and son. Unfortunately, while doing some DIY jobs at home, Russell hurt his back and was in a lot of pain. After seeing a doctor, he was diagnosed with a prolapsed disc in his back and the waiting list for an operation was looking close to a year.
Being self-employed, Russell was unable to work and was not receiving any income for his young family. He was also unable to do any carpentry jobs for an extended period given his injury and the recovery time was an additional 6 months leaving Russell out of work for a total of 14 months.
Thankfully, he had income protection insurance, which meant he received monthly payments to support his family and pay their bills and mortgage whilst waiting for his back operation and in recovery.
Russell’s case is a good example of how self-employed people, people that run their own business or have low job security could benefit from having income protection cover.
Why do I need an Income Protection Policy?
Regardless of whether you have sufficient savings or an emergency fund, the majority of us would not be able to support ourselves and our families if we couldn’t work due to injury or illness. You may be able to weather the storm for a period of time but with the rising costs of living, it’s hard for anyone to know if they’d be able to manage financially in an emergency.
Income protection insurance is therefore a very important safety-net that provides reassurance and a sense of financial security should you fall ill or get seriously injured, meaning you and your family won’t have to worry about how you are going to support yourselves and you can focus on your recovery.
According to the UK’s Health and Safety Executive latest report, “the total annual costs of workplace self-reported injuries and ill health was £18.8 billion.” With ill health accounting for £11.2 billion and injuries were responsible for £7.6 billion, there is an immense impact that time off work has on the economy.
Between the individual, government, and employer; most of the costs fall on the individual (£11.5 billion). The Office for National Statistics reported that “Between June and August 2022, around 2.5 million people reported long-term sickness as the main reason for economic inactivity, up from around 2 million in 2019”.
This increasing trend in absence from work due to injury or illness is making it more and more recommendable to have income protection cover. The Guardian’s recent article on the latest IPPR report stated that Britain’s poor record on health is costing the economy £43bn a year and cutting the annual incomes of individuals affected by long-term sickness by up to £2,200 a year on average.
The general consensus from these reports and statistics is that the majority of the cost ends up with the individual who is ill or injured which only emphasises the need for income protection cover.
How does Income Protection Work?
This will depend on the type of cover that you choose and how many ‘premiums’ you chose to pay for. Some jobs include income protection cover as a fringe benefit and your company will therefore chose the extent of your life protection policy.
Here’s some common aspects of income protection cover:
- Involves a waiting time before first payment (usually 4 weeks).
- Regular payments to substitute income.
- Only available until you are able to work again.
- Typically pays out 50-65% of your income if you’re unable to work.
- Covers most illness that affect work (long term and short term).
Income Protection Cover at Hansford Bell
We understand the importance financial stability during periods of illness or injury and have developed comprehensive policies that provide reliable income protection cover. Here at Hansford Bell, we offer no-nonsense income protection guidance for our clients.
Income protection helps cover your family’s costs and needs while also providing a well needed safety net that can give you peace of mind and secure your family’s future.
Our highly knowledge team of life insurance experts are happy to help see if you are eligible for life cover and find the right insurance solution for you. Get in Touch today to find out how we can help!
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