The 8th December 2020 will go down in world history as the date that the first non-trialist received the Coronavirus vaccination, the honour going to the UK and 90 year old Margaret Keenan. As an aside, the second recipient was a gentleman named William Shakespeare, you couldn’t script it….
I’m sure we all hope, despite what has already happened in the weeks since, that this will hopefully be a step forward in a return to life pre-Covid, with some optimism that 2021 will, at some stage, look more like “normal”, with people once again able to visit family and friends, pursue social activities and finally clear the kitchen table and return to more regular working environments.
Covid-19 has forced us all to think about our own financial situation. The need for financial resilience, stability and control has become front of mind for many when faced with job insecurity or the possibility of falling ill and becoming incapable of working.
If you did suffer a serious illness or injury that meant you were unable to work for longer than 4 weeks, how would you cope financially?
According to Legal & General’s “Deadline to Breadline” 2020 Report, if someone lost their job due to illness or injury, one in three say that they would rely on savings or cut back on spending. Some people might turn to the state and their partner or family.
Of course, Coronavirus is only one of the many ailments that people may succumb to, which can result in them being unable to work. Some employers provide their staff with a period of grace, during which they will receive their salary, however, once this has elapsed, and for those not fortunate to benefit from such cover, you can find yourself reliant on Statutory Sick Pay (SSP) which currently pays out a benefit of £95.85 per week, for a maximum of 28 weeks. After this, you may be eligible for Employment & Support Allowance (ESA) which is typically £74.35 per week.
I would suggest that for most people, reliance on these benefits would result in a significant drop in income. The report says the average working household in the UK has an annual income of just under £35,000. One in five of these have an annual income of under £20,000 which is still a considerable amount more than either SSP or ESA.
Such a fall can have potentially devasting consequences. The Deadline to Breadline report also suggested that the average household is just 24 days from the breadline and that 40% of households have less than £1,000 of savings. The report also outlines that nearly six times as many people insure their home contents, and four times as many pet owners insure their pet, rather than insure themselves through income protection. The irony of course is that the premiums for their pet or home insurance are paid out of their income.
An Income Protection policy does exactly what it says on the tin, it will protect your income (or a significant percentage of it at least) so that in the event of you being unable to work due to accident or illness, you can maintain a suitable income stream which will allow you to continue to meet your financial obligations, and crucially avoid being on the “breadline”. Cover is tailored to individual circumstances, allowing those who benefit from continued pay, to defer receiving the income protection benefit until after this period has elapsed. This can also help with the premiums on this type of cover.
At Armstrong Watson, our quest is to help our clients achieve prosperity, a secure future and peace of mind. We are Chartered independent financial advisers and can discuss and advise on all aspects of protection requirements personalised to your individual circumstances.