Glasgow, UK (PRWEB) October 22, 2012
Income protection is a type of insurance that provides a replacement regular income to someone who is unable to work due to long-term illness, accident, or disability. It typically pays 50-60% of the previous gross income, and normally starts after 6 months off work. It continues until return to work, retirement, or death.
Although it is one of the most important types of cover to have, less than one in ten of the UK’s working population has this type of cover, leaving 90% open to a massive risk.
Recent research carried out by Glasgow wealth management specialists Reid Scott & Ross reveals massive disparities in the percentage of UK households that are covered by each type of insurance.
23% of Britons (who have pets) take out pet insurance.
27% insure their mobile phone
34% have life cover
And a massive 78% insure the contents of their homes.
Compare to just 9.4% who have income protection.
If an insured person is unable to work, insurance protection pays up to 60% of their previous earnings, and that can cover all the essentials, like mortgage, groceries, utilities, as well as the material goods, gadgets, and entertainment needs of most families.
Consider the lifestyle impact if a mobile phone is lost, or if home contents are damaged. Compare that to the consequences if someone does not have insurance protection, and suffer an illness, accident, or disability that means they are unable to work again. That means there could be no money to pay a mortgage or rent on a family home, never mind its contents or other luxuries.
The fact is, someone in the UK is four times more likely to suffer a critical illness before 65 than to die before 65.
Yet – over three times more Britons have Life Insurance than Income Protection.
Why do so many think it is more important to insure their mobile phone, washing machine, or dog than our own family’s livelihood?
The three most common reasons given are:
Sadly, when the facts are examined, none of these reasons really makes sense.
Reason 1: “It’s Expensive”
Insurance protection and life insurance policies pay out far more than other types of insurance.
When comparing at the likely payouts of various types of insurance, many of the most popular premiums do not look like such good investments.
A mobile phone insurance claim pays out a tiny 2.7x the annual premium.
A pet insurance claim pays out a pathetic 3.4x the annual premium.
A home contents insurance claim (in the case of theft) pays out 10x the annual premium.
A home contents insurance claim (in the case of fire) pays out 46.5x the annual premium.
But compare those numbers against life and income protection…
An income protection insurance claim pays out a massive 104.8x the annual premium.
And a life insurance claim pays out 406x the annual premium.
But because one is four times more likely to get a critical illness than to die before the age of 65, this makes the payouts roughly equivalent, and both significantly higher than the other types of insurance.
The bottom line is, if someone is insuring their phone, pet, or house contents – but not their own income – the facts show that is a relatively poor investment in their family’s future.
The question to ask is not, “Can I afford income protection?” but “Can I afford not to have income protection?”
Reason 2: “It Won’t Happen to Me”
One in four men and one in five women will suffer some kind of critical illness before the age of 65.
Consider just three causes of critical illness. (Note: These are not even the most common causes of income protection claims. Musculoskeletal injury and stress/mental health problems both account for more successful claims than any of these three.)
Cancer - 33% of people will be diagnosed with some sort of cancer in their lifetime. That’s one out of every three of us. Approximately 50% of cancer sufferers between 25 and 44 survive at least three years.
Heart Attack - Every year 300,000 people in the UK suffer a heart attack. That’s just under one in two hundred of the whole UK population – every year. Around fifty percent of heart attack victims will survive.
Stroke - Every year 150,000 people in the UK suffer a stroke. That’s almost one in every four hundred people – every year. A third of all strokes happen to people under 65. More than half of the one million stroke survivors in the UK today have to live with disabilities caused by a stroke.
Nobody likes to think about the worst that can happen. But the worst is happening every day!
In Britain, 32 men out of every 100 will suffer a critical illness between 40 and 70. Out of those 32 men: 15 will develop cancer, 10 will have a heart attack, 5 will suffer a stroke, and 2 will have coronary artery bypass surgery
Reason 3: “I’m Covered by State Benefits”
That may be true, but only for those on a low income now.
The short-term lower rate of benefit is £74.80 (under pensionable age), or £95.15.
The short-term higher rate of benefit is £88.55 (under pensionable age), or £99.15.
The long-term basic rate of benefit is £99.15 (only applicable under pensionable age).
So, assuming a worker who is under pension age now is suddenly unable to work, the amount of support they will get from the Government is unlikely to be over £400 per month.
How likely is it that £400 will cover all a family's outgoings?
In conclusion, Reid Scott & Ross would advise any wage earner seriously to consider protecting their family’s well-being with both life insurance and income protection insurance before ordinary material goods, so that they can continue to enjoy a similar standard of living if the worst should happen.