Devon LivingIssue #05

Protecting your future

A staggering one in ten of us will face a period of sickness absence of more than six months during our working lives. We talk to Harris Begley Financial Planning about what you can do to plan for such an event.

Whilst you may have life cover in place, the question arises of how would you, or your family, cope if a wage earner was off work for a long period of time?

(Source: Demos survey, April 2013). One route is to take out an Income Protection policy.  This product is designed to pay out a tax-free* monthly sum in the event that you are unable to work due to illness or injury. In general, it will pay out until you are either well enough to return to work, have retired, the policy ends, or upon your death; whichever happens first. (*Under current legislation, tax year 2017/18)

Each policy will have different conditions, such as cover choices against not being able to work in your own occupation, or any occupation, and you would obviously need to disclose any pre-existing medical issues. Initially it’s useful to establish if you would only receive the Statutory Sick Pay of £89.35 a week in the 2017/18 tax year (paid for up to 28 weeks, if you qualify), or if there are additional benefits from your employer or the state. Once you’ve got an idea of this income stream, you can then decide when you’d like your income protection cover to kick-in (called the deferred period). The longer you wait the cheaper the premium will be. 

It pays to be sensible about how much you require until you’re able to return to work (or have retired). In the same way you wouldn’t need a pay out commensurate with buying a new house if the kitchen floods, your potential pay out via an income protection policy should be calculated in a similar way (up to a maximum amount). And again, the less you need, the lower the premium.

The sobering fact is that each year, a million people in the UK suffer a prolonged absence from work due to sickness, and up to half of those would find their savings have run out after just a few weeks! So, it makes sense to plan accordingly by contacting Harris Begley now for a free initial financial health check.

(Source: The Chartered Insurance Institute, 2016 report).


You may also require advice on the legal and tax issues.

HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The value of pensions and investments can fall as well as rise. You may get back less than you invested.

Income Protection is a complex product, with a vast array of options, so it is essential that you take advice.

As with all insurance policies, terms, conditions and exclusions will apply.

"The longer you wait the cheaper the premium will be. "