A J Smith & Company Ltd.
Income Protection

What is Income Protection?

Income Protection is a long-term insurance policy, designed to replace a proportion of a person's income should they suffer an illness or injury that prevents them from working. Policies pay out up to 50%-75% of the policyholders' pre- disability income; so there is still an incentive to return to work. The policy will pay out until work is resumed, or retirement, or death, whichever event happens sooner.

Policies usually cover a person up until retirement age, although, increasingly, people are selecting policy terms that tie in with the term of their mortgage. It is also possible to take out cover with limited benefit payment periods in return for a cheaper premium; so rather than replacing a proportion of a person's income right up until they are fit enough to return to work, the policy only pays out for three years, for instance, or five years, and then benefits cease.

Why is it needed?

According to the Department Of Social Security, it is 19 times more likely for a person to be off work for more than six months due to illness or disability, than it is for them to die before the age of 65.

Most people believe that the state will help out should someone suffer a long-term sickness or disability. However, State support is minimal and means-tested; meaning only the worst-off in society will be eligible.. Employers may only be obliged to pay statutory sick pay of £60.20 per week for 28 weeks, after which a person will have to rely on State incapacity benefit. (See table below)

The self-employed are even more vulnerable to the financial consequences of illness or disability, since they do not have employees' sick pay to fall back on; they start losing income from the very first day they are unable to work.

Living on an income of around £60 per week will not cover the cost of food, clothing and bills, let alone the mortgage repayment. Without protection in place, a person puts at risk not only their lifestyle, but also their home, and their dignity.

State benefits for incapacity
Under State pension age

Short-term lower rate (first 28 weeks) £50.90
Short-term higher rate (29-52 weeks) £60.20
Long-term basic rate £67.50

Source DSS April 2000

To find out more about protecting your income and your lifestyle, or to obtain an illustration of the cost of this invaluable cover please contact us.

89 Buxton Road, Heaviley, Stockport, SK2 6LR. Telephone 0161 477 8181.

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