Everyone likes to have a level of security in their life. When you are younger and have no responsibility to anyone but yourself, that security can be very light, but as you mature and build your own family, the need for you to have plans in place should something go wrong become more important.
No one wants to be in the horrible position where they become sick or injured and feel that they must continue with their normal work life because if they don’t, the financial difficulties will be devastating. Worse still, no one wants to be in the position where they absolutely cannot work and must suffer those financial difficulties.
Income Protection (IP) is a form of insurance that provides financial cover and assistant to you should you be left in the position where you cannot work. Quite simply, it protects your income.
Until you have recourse to call on sick pay, the chances are you have never really thought about it. It is one of those things, like pensions or medical insurance options, that you skim over in the work contract, eager to get to the point where you sign your name and can start your job! Salary – that’s something we take note of, paid days off too – read through those before signing, but the sick pay scheme? That can be left for another time and the contract exchange quickly becomes scan, scribble, smile, start!
Sick pay can come in all sorts of levels:
This is where you can relax. Your company pays your salary whether you are at work or not. Feeling the sniffles in the morning? Call in sick. Twisted ankle? Call in sick. Seen something really good on Netflix that you want to binge watch? Call in sick.
None of us here at Quick Quote Life would ever consider doing that last one, of course!
There is no legal requirement that your company sort out an all-encompassing sick pay arrangement. It becomes one of those perks of the job that marks out a good employer from a less-enticing one. Different bosses have various opinions on a no-questions-asked sick pay scheme that guarantees you your salary irrespective of the number of days you are in work that month. Some argue that it keeps up morale and loyalty and, by extension, high quality motivated staff. Others say that it encourages laziness and opens the door for people to take advantage, declaring that it short-changes devoted workers while benefitting slackers.
And there are some fair and compelling arguments on both sides of that coin. The chances are, however, if your company does have a full sick pay scheme like this, you never spend much time considering how lucky you are!
Many other companies tread a middle-ground, offering a solid level sick pay scheme with full salary but limited in some way to try to prevent abuse. You still get the chance to call in sick after a particularly crazy night that culminated in a stagger home at 3am, but do it too often and you run out of grace. Some companies impose a fixed number of no-questions-asked sick days, others want some kind of proof of illness, still more insist on a home-visit to see how you are (and that you’re not faking!).
Again, it is completely up to your employer to choose the extent of their sick pay offering.
Some companies offer a percentage of your pay on sick days, keeping your head above water but taking care to encourage you back to work as soon as possible. They may not offer pay at all for the first day off, but 50% or more for subsequent days that are backed up with a doctor’s note, stopping the casual sickie but providing for real illnesses.
We are lucky in the UK that we have a welfare state, the NHS, and all sorts of other schemes in place to keep us from falling too deeply when we are struggling. One of those schemes is Statutory Sick Pay (SSP), which is in place to help if your employer doesn’t have a superior sick pay scheme in place.
Done through your employer for ease of administration, SSP provides you with a legal minimum amount of money should you become seriously ill or injured.
Of course, SSP is considerably less encompassing that most dedicated sick pay schemes, providing the bare minimum required. Currently, SSP:
The truth often is that SSP is far too small a payment to help many people, especially those with families to support.
Income protection is a personal insurance cover to provide you with enough money to realistically pay your mortgage and bills during a period of extended illness. Low cost premiums mean it is affordable for anyone with a stable job, and it provides the peace of mind needed to know that you can live your life without fearing financial stability should you be out of work for an extended period.
IP will pay 65% of your salary to you each month you are sick with no caveats. Different policies have set terms (for example two-years or five-years), but it is possible to get cover for your entire working life (up to retirement age), meaning even a completely life-changing illness doesn’t have to mean financial disaster.
Income protection is designed as a cushion and never the primary solution and is capped at 65% to prevent a reliance on it rather than returning to work when possible. That said, it is important to understand that the 65% is completely tax free, meaning that the actual amount in your bank account is often close to your previous take-home amount.
For an example, on a salary of £36,000, the monthly take-home after tax is £2,321.74. Income protection would mean receiving £1,950 per month while sick. Not the complete amount but much better than the slightly more than £1,500 that would be provided if taxed.
Similarly, the difference for someone on the slightly lower salary is less than a £350 deficit (£1,641.74 usual take-home, £1300 on Income Protection).
Compared to the meagre £387 per month SSP offers, Income Protection is a true godsend!
At Quick Quote Life we are experts on Income Protection and other forms of personal financial insurance. Give us a call today to see how we can help you or fill in our contact form to have one of our advisors call you back at a time convenient to you.