Sarah Tucker is joined by Gemma Sawyer to talk all about Income Protection.
Gemma Sawyer works as a Protection Adviser at The Mortgage Mum, who alongside Carolyne Fairfull, gives exceptional service when it comes to protection insurance. They are both wonderful people, both mothers, and both have lots of understanding and empathy for every situation that comes across their desks.
In the Life Insurance episode, Gemma shared how her husband got into a motorbike accident and was left in hospital needing a major operation and lots of recovery time. He was Self-employed, and there is no clearer way to demonstrate why Income Protection is needed.
What was the additional impact that had on you as a family that wouldn’t have been there if you had Income Protection in place?
It meant there was considerable stress on the family, and that other family members had to help out with work for my husband. I had to rush back to work very quickly as well, and it really does make you think about how, if we had that protection in place, life would have been a lot less stressful at that time and we could have focused on the important things.
What is Income Protection?
Income Protection is basically arranging your own sick pay. If you’re Self-employed, you don’t have any sick pay or if your employer gives you some sick pay, but it’s not going to be endless, it’s a replacement for sick pay.
It means that when you’re sick or have had an accident, it gives you a monthly income so that you can carry on paying your bills and your mortgage.
How important is it for those customers who are employed?
Very few people know how much sick pay they’re entitled to. Even if you’ve never had a day off, it doesn’t mean you never will, so it’s really important to have a look at what that means. Some people get a week or two of sick pay, but many illnesses will last beyond that.
Where can people find out how much sick pay they have?
It’s typically in the contract, and it’s really long and really complicated. Quite often we will just share the screen and look through it with the client to get a good idea. Contact your HR person if you haven’t got a recent copy of the contract.
Self-employed workers don’t get sick pay at all, but everyone who’s experienced some kind of illness in their family knows it happens.
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What’s the difference between Life Insurance and Income Protection?
Life Insurance is there to benefit the people you leave behind, but Income Protection benefits you. Income Protection is there so that if you are sick, if you have an accident, you are going to get some money each month. If you’ve got a family to support that relies on your income, then it is also there to benefit your family.
They are two very different products, both very relevant when you’re looking at buying a house, whether you’re on your own or you have a family. The most likely thing to happen to you in your working life is that you may not be able to work, whether it be for a short amount of time or a longer period of time, so it’s really the most important thing to consider first.
How much is Income Protection?
We always say to our clients that 10% to 15% of your mortgage payment should be put aside as a protection, as an idea of what a great protection package will cost.
Is it more expensive than Life Insurance?
Yes, it is, but there are so many ways that you can make Income Protection more affordable. There are so many Income Protection products to choose from, so many different options with regards to how long you wait for your cover to start, which makes a massive difference to cost.
If you’ve got some sick pay, and a big pot of savings that you can dip into, that really makes a difference. You could have a policy that starts to pay you after four weeks of being off sick. But you could wait for three months, six months, or even twelve months. Those kinds of things really make a difference to the cost. It’s very specific to each individual depending on their situation. It’s a real balance between the cost of the policy, and what’s going to help you at that time.
The other way to make it cheaper is to have a shorter term policy. Every time you’re off sick, you can claim for up to two years. That’s what we would call a budget option, which is really popular. It would give you two years worth of peace of mind that you’re going to have income coming in. There’s no limit to the amount of claims you make, but each claim would be limited to two years.
The best policies will continue to pay you until retirement, each claim, so that claim could be as long as you need it. If you could never work again, they would continue to pay you until retirement. There are so many ways that we can tailor Income Protection, which is why it’s best to talk to a broker as they can tailor it to your needs, and get the price that you’re happy with. There is no point in paying for something every month if when you need it, it’s not going to be there for you, so we would always do lots of research for each client, to make sure that they’re getting exactly what they need to have if they need it.
Those who have manual jobs are more at risk if they get sick, as they can physically find it harder to go back to work. The smallest thing can mean that you can’t work if you’ve got a manual job. The biggest claims on Income Protection are joint problems, muscular skeletal issues, and mental health issues, all of which can affect manual workers as well as desk jobs. Cancer is the third biggest claim, so these policies really do cover everything, and should be considered by everybody.