Hi I’m Kathryn, a protection insurance adviser. That means I help people to get life insurance, critical illness cover and income protection. I specialise in helping people with health conditions to get insurance, especially when they have been told that they cannot have cover.
I’m going to focus on some key things with regards to how to protect your income as a women, things that I think women should really know about.
Be financially independent
An insurance policy that is being overlooked so often is income protection. I’m 35 and a non-smoker. The risk that I won’t be able to work for more than 2 months because I’m ill is 41%. That means that for every 100 people like me, 41 will need to take a few months of work at least. Statutory sick pay is currently £95.85 per week. That’s roughly £415.35 to live on for a month.
An income protection policy pays out a regular monthly income to you, if you are unable to work due to ill health. Depending upon the insurer that you use, you can also get access to things like remote on demand GPs, rehabilitation services like physiotherapy, access to specialist nurses to help you understand and adapt to health conditions that you have.
It used to be that not many women took out these policies. Women often stayed at home with the kids, or the man of the house brought in the main money and priority would be given to his insurance needs. I’m thrilled to say that this mindset is changing.
It’s not something that we want to think about, but people can become seriously ill and unable to work, people can die, relationships can end. I’ve had close friends be hit with complete whammies when partners could no longer provide to the household. They were faced with raising children on their own and maintaining the house, all on their own salary.
It’s great to plan a future together forever, but it’s sensible to plan just in case something happens and you can only rely on your own money. By having something like income protection you can protect your income if you fall ill. Some policies can also offer financial support if you have a child who becomes ill and you need to take time away from work. There are lots of things that these policies can potentially do, it’s not just about the money, it’s all the extras that can truly make a difference if you need to make a claim.
This is a must, must, must! There are so many people that I speak to that have no idea what their employer offers them. We are all, hopefully, quite aware of the pensions that are in place through work as this is an employment requirement. But, things like death in service (life insurance) and sick pay (above statutory sick pay) are not something that an employer has to offer.
Speak with your employer and find out if you have anything like this, you can often find it out through the Human Resources department. This is also really important if you are wanting something like income protection. Income protection kicks in after a certain amount of time of you being unable to work due to ill health and this cannot clash with your employment benefits.
As an example if you get 2 months full sick pay from work, there is no point in arranging an income protection policy that kicks in after 1 month. You will be paying a higher premium with it being able to cover you so soon if you’re ill, but you will not be able to claim on it (even though you are paying for it!) until after the sick pay from work ends.
There are also quite a few good options if you are an owner of a Limited company. These are known as Group Income Protection or Executive Income Protection. The one you can access can depend upon your company structure, if you employ people and a couple of other eligibility criteria. Why do this instead of arranging it another way? The premiums can be offset against your business tax.
Know Your Options
There are so many versions of income protection, it can be daunting when you first start looking. Here’s a quick rundown of things you will see:
- Monthly Benefit: This is the amount that the policy will directly pay to you each month if you make a successful claim e.g. £1,200, £1,750, £2,200.
- Deferred Period: The amount of time that you must be unable to work due to ill health, before the claim can start e.g. 4 weeks, 8 weeks, 26 weeks, 52 weeks.
- Policy Term: This is how long the policy lasts for, usually to a set age e.g. 60, 65, 68.
- Premium: This is what you will pay each month to have the policy e.g. £25, £55, £90.
- Premium Type: The way your premiums are set up e.g. guaranteed, reviewable, age-banded, index-linked.
- Claim Term: This is how long a potential claim can pay for e.g. 1 year, 2 year, 5 years, to retirement age.
All of these options can be tweaked to alter the policy to suit your needs and your budget. The cheapest options will have longer deferred periods and short claim periods. You will pay the highest amount for policies that can start supporting you after 4 weeks of incapacity and that can pay all the way to your retirement age.
Something to carefully look out for, is the premium type. Ideally you want a guaranteed premium, where you know that what you pay for the policy in month one, will be what you pay ten years from now. But that isn’t always possible, for a few different reasons.
When I’m advising people I like to show them the difference of a guaranteed versus age-banded premium. A guaranteed premium is most likely going to look way more expensive than an age-banded one. You will probably look at them and think that someone is taking the mick, thinking that you would pay the higher premium over the much more desirable lower one.
But. There is a huge difference. Look at the total premiums that you pay over the full policy. Age-banded premiums start off smaller and then quickly jump up steeply as you get older. In the long run it can sometimes cost you £1000’s more to go with the cheaper option in the first place. There is definitely a time and place for age-banded premiums, they can be really good options for some people, it’s just essential to realise what they can mean price wise in the long run.
This is a little tangent, so bear with me. People with children under the age of 4 can currently access free life insurance. Yes, free life insurance. No, I’m not making it up. No, I’ve not misunderstood. And no, it’s nothing dodgy.
At the moment Aviva offer free life insurance to each parent of a child under the age of 4. You can start the policies anytime up to the child’s 4th birthday. The life insurance will last for 12 months and each parent can have £15,000 of cover. I did it with all my three children, I didn’t have to put in any payment details, it was just a couple of simple forms online.
I’m really well insured but the northerner in me cannot pass up on something free! I think it’s a good idea to have a look at it and see if you are eligible. Did I mention it’s free?!
Don’t take no for an answer
Most of the people that my team provide advice to have medical conditions. Income protection is brilliant, but it can be quite strict when it comes to getting the cover. The main reason being that if you have a medical condition, they may want to exclude any claims relating to it. This isn’t the case for every health condition or every type of insurance policy, but it is something to be aware of.
No matter what, my suggestion is do not take no for an answer. If you have applied for income protection in the past and been turned away, please do not give up. There are lots of different ways to set up these policies, they can be tailored in many ways to meet your needs.
There are times that people get exclusions on their policies or the premiums are increased because of their health. It’s not nice when it happens, but insurance is based upon risk. Insurers look at how much risk they feel there is of a claim happening and unfortunately there are times that someone is considered to be riskier.
I always think it’s best to find out what is possible, before making a decision. You may think you are going to have an exclusion, that it’s going to be too pricey, but it may not be. Advisers can help you to tweak the policies to help you get what you want and to take steps to protect your income.
What to do
First thing, confirm with your employer what kind of income protection that they provide. I am an adviser and I do think that you get the best quality from speaking with advisers, but there is no hardship in doing some research on online comparison sites. You may find exactly what you want at the price that you want, no matter what the main thing is that you get protection in place.
If you do want some advice, if all the jargon is getting too much or you simply just want an expert to step in and help, then I say speak with an adviser. Check that they are registered with the Financial Conduct Authority, find out if they are whole of market or limited to a handful of insurers, and definitely check if there are any ties-ins to using their services.
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