What happens to me financially if I can’t work?

by | Wednesday 5th Aug 2020 | Mortgage Insights

In an uncertain economy, it’s understandable that people might worry about job security and what happens if they suddenly find themselves out of work through redundancy or the sudden collapse of the company they work for.

What people don’t always think about or plan for is the possibility that they will unexpectedly become so ill that they are unable to work – either temporarily or permanently.

According to Government statistics, close to a million people a year are absent from work for a month or more.

Cancer Research UK estimates that there are more than 990 new diagnoses of cancer every day in the UK. Of these half will be terminal. The British Heart Foundation believes that 2.7 million people are living with the after effects or a heart attack or stroke.

Ignoring the myriad other conditions, such as severe mental health issues, that leave people unable to work in the long-term, those figures represent 6.1% of the UK population. The latest data released by the Office for National Statistics puts UK unemployment at 3.8%.

It’s not hard to see from those figures that the possibility of losing your income to a long-term illness is arguably a greater risk than losing your job.

So, what can you do to protect yourself financially against diagnosis of a serious condition that ultimately prevents you from working for an extended period of time?

There are two key policies that can provide peace of mind: critical illness cover (often referred to as cancer cover because cancer accounts for the majority of claims) and income protection insurance.

The two policies are very different, and you should speak to a professional adviser to determine which of them is best suited to your needs.

Critical illness insurance will pay out a lump sum on diagnosis of a qualifying condition. Depending on the level of cover you choose, this will give you the security of knowing you can meet any ongoing financial commitments and is usually the better policy if you are concerned about a diagnosis that stops you working permanently.

The money you receive can be used for any purpose.

Income protection will give you a tax-free monthly income in place of your regular salary if you’re too ill to work for an extended period. This can be a good choice where a return to work at some point is more likely than not to be possible.

The pay out is tax-free and usually equates to around 75% of your normal salary.

You should also remember that you should also receive statutory sick pay from your employer for up to 28 weeks. Beyond that you may be eligible for state benefits. These will help to supplement your income protection pay out.

Bear in mind that both policies are likely to be subject to a qualifying period of up to three months from the date they are taken out, preventing you from making a claim within that time.

These policies, together with life insurance, can give you complete financial security should you become seriously ill or die.

If you are worried about losing your income through unemployment, there are also insurance policies you can take out to protect your mortgage payments and other commitments.

If you’d like to find out more about critical illness cover, income protection or life insurance, why not get in touch with a member of our friendly team. We’ve helped hundreds of people secure their financial security for the future – we’d love to help you, too.

Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments on your mortgage. Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.

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