If you are a daytime TV watcher, you’ll have seen your fair share of life insurance adverts. They are usually aimed at the older generation, but the fact is that it should be something you seriously consider as soon as you become tied into your first financial responsibilities.
That could be a car, a property or starting a family. If you are a single parent, these sorts of insurance products are even more important to consider. In particular, income protection insurance.
Why is income protection so important?
Think about it – are you more likely to pass away before retirement, or become seriously ill or injured? I’m sure you would agree that it’s probably the latter. It’s not a nice thing to think about but it’s a home truth. We’re all living for longer these days, with life expectancies consistently on the rise. Whilst this gives us more time to enjoy treasured moments with the ones we love, it also means we are more at risk of developing health conditions.
This could happen in your 50s, your 60s, or even in your 30s. There’s no guarantee. If it did happen whilst you were still working and financially supporting your children, what position would they find themselves in? Income protection would provide a financial safety net that means your world and their world wouldn’t get turned quite as upside down as it would have otherwise.
Ok, so how does income protection work?
When you take out an income protection insurance policy, you choose how much cover you receive. This will be a regular portion of your monthly salary – typically 50-70%. The more cover you take out, the more you’ll pay per month in premiums.
You’ll also usually need to decide on a deferral period. This is the period of time that must pass between making your claim and receiving your payout. This can be anything from 4 weeks to 12 weeks. The longer the deferral period, the lower your premiums will be.
Once you begin receiving your payout, it will continue to pay out in management chunks each month until you either recover and go back to work, reach state pension age and retire or pass away – whichever comes first.
What does income protection cover?
Income protection covers a broad range of issues – essentially most things that render you unable to go to work. This includes mental illness and stress-related issues, long-term back pain, cancer, serious illnesses caused by accidents, heart attacks and strokes. The list goes on.
There are exclusions, however. You won’t be covered for any pre-existing health conditions that you knew you had before you took the policy out. You also won’t be covered for anything that could have been avoided should you have followed medical or professional advice. Similarly, anything drink and drug-related is not covered, along with issues caused by cosmetic procedures or war.
Essentially, if it’s not a total unforeseen accident, it probably won’t be covered.
Why is it so important for single parents?
Having a plan in place to cover yourself financially in the event of injury or illness is smart for any working person, but especially a single parent. Finances can sometimes be tight in a single-parent household, as you are reliant on one income. If that income is then suddenly missing, financial struggles could quickly ensue.
Yes, you may qualify for Statutory Sick Pay (SSP) and you may have some savings tucked away for a rainy day, but this will only cover you for so long. It’s difficult to know how long you could be out of work. Income protection gives you the peace of mind that you are covered, no matter how long it takes to get better. Plus, your children can continue to live their lives as normal because you can continue to pay the bills, put food on the table and afford those little treats and luxuries.
Do single parents need income protection? is a feature post