Learn the lessons of the pandemic and protect your income

by | Friday 28th Aug 2020 | Mortgage Insights

If there’s one thing that the Covid-19 pandemic has, or should have, taught us, it’s that just when life seems to be ticking along nicely, things can take a sudden and unexpected turn for the worse.

One of the most surprising statistics I’ve read recently, beyond the terrible and catastrophic figures relating to illness and loss of life caused by the global crisis, has been the number of people who have neither savings nor income protection.

Despite recent market research reported by HR News suggesting the pandemic had sparked a rise in people prioritising their savings, a recent study published in insurance industry magazine Cover suggests that the self-employed – arguably the ones at the greatest risk of economy-driven income fluctuation – have little or nothing to fall back on.

Less than 25% of the UK’s self-employed workers have any savings to get them through another crisis that prevents them from working, yet fewer than one in ten – only 9%, to be exact – have personal income protection to replace their earnings should they find themselves out of work.

But whether you’re self-employed or in a salaried job, putting contingency plans in place to look after your personal finances has never been more of a priority – especially now that the UK is in the grip of the worst recession of modern times.

Planning for your future financial security isn’t just about protecting yourself against world-stopping crises such as Covid-19; it’s also about planning for the equally unexpected, but sadly much more common crises such as serious and debilitating illness.

Critical illness insurance – often referred to as cancer cover because of the illness that accounts for most policy pay-outs – and life insuranceare other elements of financial protection that can give peace of mind for the future.

The truth is that not all of us can afford to save the kind of money that will see us through five or six months – maybe even longer – when we can’t work, and those are the times when the government won’t be on hand to offer financial support in the way it has in recent times.

However, insuring against both the unimaginable and the unexpected doesn’t have to cost the earth. Depending on your age and the level of income you want to safeguard or pay-out you wish to receive, monthly premiums can be very reasonable.

Here’s a basic overview of the benefits each policy can offer:

Income protection

Income protection offers a regular payment to replace the majority of your salary should you become unable to work either over an extended period or permanently due to an injury or chronic illness.

Although the payment is a proportion of your regular income, the fact they’re tax-free means they will be close to your take-home pay amount.

Critical illness cover

This policy will pay a lump sum on diagnosis of a terminal illness. The payment can be used for any purpose, whether it’s to pay down or pay off mortgage debt, fund private treatment or meet ongoing living costs.

Life insurance

It’s likely you already have a life insurance policy to cover your mortgage in the event of your death or that of a joint mortgagee arranged pre pandemic. But are you confident it’s fit for purpose post pandemic?

If you have a whole life policy, it will pay out a fixed lump sum whenever you die. If you have a term policy, the sum paid on death is either the same regardless of when you die (level term), decreases over the life of the policy (decreasing term) or increases over time (increasing term).

You need to be sure the sums that will be paid are sufficient to meet the needs of those left behind – especially if you have a decreasing term policy.

If you’d like to find out more about these products or learn how Oportfolio can tailor personal protection to your specific needs and circumstances, why not get in touch with a member of our friendly team today?

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